Institutional investors reactivate the "buy the dip" despite the fall of the S&P 500

Optimism returned to the U.S. markets amid a correction. According to the latest weekly report from a major bank, investors bought $3.9 billion in U.S. stocks during the past week, marking a strong rebound in activity after three consecutive weeks of selling.

Net inflows into individual stocks reached $4.1 billion, becoming the fifth highest figure since 2008 and the largest ever recorded in a week where the S&P 500 fell by at least 1%.

This reflects a clear change in behavior: investors are not fleeing from volatility, but rather taking advantage of corrections as an entry opportunity.

The main impetus came from institutional investors, who added $4.4 billion in net purchases, the highest volume since November 2022. These figures confirm that large funds are re-entering equity positions, possibly anticipating a more favorable scenario in the fourth quarter if the Federal Reserve keeps rates unchanged.

Retail and hedge funds in opposite directions

For their part, retail investors also showed a rebound in confidence: they bought $1.1 billion, marking their second week of purchases in the last six.

Although retail activity remains moderate compared to the peaks of 2021, its participation indicates that the “buy the dip” narrative continues to hold strength in market sentiment.

On the opposite side, hedge funds continued to reduce exposure, with net sales of $1.6 billion, completing their fifth consecutive week of divestment.

This contrast between institutional purchases and hedge fund sales suggests a strategic divergence: while speculative funds prioritize short-term risk management, institutions appear to be positioning themselves for a more sustained rebound.

Outlook for the fourth quarter

The macroeconomic context remains challenging. Volatility remains high, the 10-year Treasury yield hovers around recent highs, and global growth prospects are mixed. However, the strength of employment in the United States and the resilience of corporate profits have prevented a deeper deterioration in overall sentiment.

In this scenario, recent flows could be interpreted as an early bet on a year-end rally, driven by stabilizing inflation and the expectation of a more patient Fed. If the trend continues, the “buy the dip” narrative could once again become a dominant force in U.S. markets, especially heading into the end of 2025.