Retail investors are still pouring capital into the US stock market at a pace that ranks among the fastest on record, even as signs emerge that the momentum for buying on dips may be waning.
Data compiled by Scott Rubner, head of equity derivatives strategy at Citadel Securities, shows that through July, there was not a single net selling day on the firm's retail cash equities platform. The average daily net retail purchase amount was approximately 3.2 times the historical monthly average, making this July the second-highest month for retail inflows since January 2020.
While retail traders remain net buyers of call options, their appetite for these bullish bets is beginning to cool. An indicator from Citadel Securities that measures call options relative to put options shows the ratio has fallen to its lowest level since late March. This suggests a growing inclination among investors to purchase downside protection rather than simply chasing market rallies.
This shift represents a notable departure from the "buy the dip" mentality that has prevailed throughout much of the current bull market, a change particularly evident in the technology sector. During the recent pullback in the Philadelphia Semiconductor Index, retail investors were net sellers of semiconductor and hardware stocks. Nonetheless, following each decline, chip stocks have managed to stage a swift recovery.
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