The 'buy the dip' strategy is no longer a go-to for retail investors as bonds start to become more attractive

3/17/2023

Per Business Insider

A recent note by Vanda Research says that the "buy the dip" strategy is no longer a go-to for retail investors. Vanda highlighted the risks this could have on the economy.

Vanda Research said that the stock market would be put at risk with retail investors no longer buying the dip. In March, daily activity dropped below $1 billion.

Vanda gave a statement about the situation, mentioning the risks this could have on the economy. It was noted that, as a result, broad equity indices would be affected.

Vanda: "The key takeaway is that a significant pillar of support for this year's rally will likely remain subdued in the weeks ahead. This will make broad equity indices more susceptible to the whims of institutional investors, which remain broadly more cautious on the near-term outlook,"

Vanda noted that more people are now looking at bonds as their rates look more attractive. This could mean less money flowing into the stock market as more people opt for bonds.

An example of this is short-term US Treasuries are starting to get closer to a 5% level, making it attractive enough for investors to get risk-free returns. The US Treasury 10-year yield sits at 4%.

Vanda: "For equities, the risk is that retail appetite for bonds could siphon away some crucial demand right before key events in March,"

In September 2022, the stock market resulted in Americans losing $9 trillion in wealth. Holdings in corporate equities and mutual fund shares fell from $42 trillion at the start of 2022 to $33 trillion during the time of the report.

Toward the end of 2022, it was reported that the wealthiest Americans actually owned the majority of the stock market. 10% of the wealthiest Americans reportedly owned 89% of the stock market.

The bottom 90% of the population reportedly only added $1.2 trillion in total.

See flow at unusualwhales.com/flow.

Other News:

Resources:

Business Insider