Retail Investors: The Resilient Buyers in a Volatile Market

With stocks seeing record highs, April's stock sell-offs seemed like a world away.

While we might perceive casual traders as being shaky, easily frazzled, or paper handed, retail investors were not responsible for the deep red days we saw a few months ago.

Rather, many retail traders were actually buying the scooping of tech giants.

Including Nvidia in the low 100 levels or even below that price, and they may feel emboldened now, potentially helping to revive short squeeze season via Mecos last week.

Joining me on this Wednesday morning is Brett Camwell, US investment analyst for E.

Brett, good morning and thank you so much for joining me.

So With the major US stock averages at elevated levels, we have to keep in mind that there's a lot happening beneath the surface, but when we think about retail traders, we may perceive them as sometimes being fickle and quick to dump their holdings when the market goes south.

So does your data actually show this or the opposite?

Yeah, Rey, so first, thanks for having me.

And yes, I think when we look at retail investors, we have a group that continues to make, you know, the right moves over the long periods of time, you know, so in the short term, when, especially when volatility is hectic and high and and the environments are chaotic, those can be very difficult periods to navigate, but retail has proven time and time again whether this is through hard data looking at, you know, buy and sell orders during you know, sort of the bottoms of the, um, of these pullbacks like in early April, when we look through the data, we see that retail is very active in these, uh, in these stuffs, but they're, but they're buyers, they're, they're looking for that opportunity.

And then when we do our survey work, we see that they like to step into that volatility and they acknowledge You know, the emotional impact that these periods have, they say that they are, you know, they're anxious or they're worried, but they're also showing through their actions that they're they're buyers of it.

They look at this as an opportunity and I think when you go back over the last few years, you sort of look at these.

These types of dips, whether it's, um, you know, the COVID sell-off, which I, I think, you know, that COVID period really brought a lot of retail investors in and they stayed despite, you know, the volatility we've had over the last few years.

But you look at maybe at the 2022 bear market, you even look at the um the, the most recent pullback, the tariff pullback and at the end of Q1 and early Q2.

Retail is embracing these opportunities as a buying opportunity.

Yeah, and Bret, I think volatility is the key word here because when we think back to early April when we saw not just 1000 point drops in the Dow but even 3000 on some days, that's a lot of volatility in a single trading session.

So now that we are past that in the halfway point of 2025, where are retail traders actually positioning themselves?

Well, retail investors, not surprisingly, they're big fans of tech.

They're also fans of financials, and those are two groups that we've seen do fairly well, um, admittedly over different stretches of time.

Financials have been very strong performers over the last year, and so we do our quarterly survey work with, with retail investors and Financials are routinely at the top of that list when we go on a sector by sector basis, but tech is also near the top of that list, and it's not that surprising.

I don't think tech is a great performer.

They have exciting technologies.

They have the businesses that retail investors interact with generally on a daily basis.

Um, and, and, but when we look at how tech has performed, it hasn't exactly, it hasn't been that consistent.

Um, Q2 is a great quarter, uh, for tech.

I, I think, you know, the, the runway is there for tech to have a great second half of the year.

But when we go back over the, you know, prior three quarters, that really that Q3 2024 through the first quarter of this year, uh, tech was actually the worst performing sector in the S&P 500.

So it's nice to see that group back.

It's good to have that leadership, and I, I think retail is excited about it.

Yeah, and speaking of tech after the closing bell, we'll be keeping a close eye on meta as well as Microsoft.

So finally, before I let you go, I do want to ask you about meme stocks.

We saw the revival of meme stocks recently with your CEO saying calling this a meme stock moment.

So do you think this is short lived, or do retail traders mean business, maybe even more so this time around?

You know, I think even if we take a step back for a minute and we kind of look at where what the market has done, you know, from a top-down perspective, you look at like the S&P or even the Nasdaq, those, those indices are up 30% and 40% from their lows a few months ago.

It's been a very, very strong, um, you know, really about 3 months.

It's been a very strong stretch and, you know, I think as we get kind of progress through that rally, we start to get, you know, there's moments of speculation.

Um, you know, that's kind of drums up some of those old feelings of the, of the short squeeze and, and the meme meme stock days of um 2021 we start to think of GameStop and AMC.

I, I personally don't think we, we see that sort of revival.

I think this will be more of a short-lived, um, situation with the meme stocks.

We've seen kind of these, a few of them pop up since, uh, you know, since 2021, and, um, and they've been short-lived as well.

So I, I think this will be short-lived.

Yeah, and very quickly before I let you go, are there any key levels that you're paying attention to, not just the major averages, but in other sectors as well?

Uh, on a sector basis, you know, I again want to go back to tech.

It's got the best earnings or the highest earnings growth expectations for the year, um, and this group has a lot of momentum.

Could, could use a little consolidation admittedly, but I do think that the, the runway is there for them to have a good second half of the year and really as we go into 2026.

But from an overall perspective, it's been a great run for US equities.

Would a 5 to 10% pullback be welcomed by investors?

I think it would be, I think the dip would be bought.

OK, Brett, well, great having you on.

Thank you so much for joining me this morning and thank you so much for sharing all of your insights.