Retail traders pass on the dip

If you’ve noticed that your Tesla-loving, Robinhood-obsessed friend is lacking the usual pep in their step, they’re not alone.

Amid conflict in the Middle East and fears of potential stagflation, retail traders are stepping back and taking an uncharacteristically reserved approach to the market. Or in other words: Nobody is buying the dip.

“For the first time this year, retail investors are showing persistent signs of weakness, with weekly purchases decelerating by ~30% after defying seasonal patterns,” Arun Jain, JPMorgan’s head of US equity quant strategy, wrote in a note yesterday.

Monday marked the largest net-selling day in single stocks in a month, Jain and the team noted. While purchases ticked up to a net positive by Tuesday and Wednesday, their pace was still below the year to date average. According to JPMorgan, retail traders have been shaken by geopolitical instability caused by the war with Iran, as well as AI-anxiety that’s rattled both equity and credit markets.

Zoom out: Since 2020, retail investor enthusiasm has been a sort of shock absorber for market declines. Retail participation has steadily climbed since the meme stock heyday of 2021, and in 2025 they accounted for 20% to 25% of total investing activity for the entire year—peaking at 35% in April, when they bought the Liberation Day dip en masse and buoyed the market to new heights.

But if optimism and enthusiasm are waning among usually rabid equity investors, stocks could lose an important pillar of support, and a downturn spurred by the conflict in Iran could become protracted.

What AI bubble?

Despite the fact that uncertainty often drives traders into defensive sectors, that hasn’t been the case this time. Instead, the retail traders who are still buying are focusing on AI stocks.

While fears of AI destabilizing the entire economy or missing expectations and causing a market collapse are still rampant, the retail crowd isn’t ready to give up on AI just yet. Instead, they’re selling energy stocks as oil prices surge.

Specifically, retail traders bought names like Nvidia, Microsoft, and Tesla, while some of the steepest outflows were from Exxon, as well as State Street Energy Select Sector SPDR ETF.

Retail traders might be worried, but it seems their love affair with the AI trade can’t be extinguished that easily.—LB