Even the strongest bulls can't hold on anymore? Retail investors have "sold off" U.S. stocks for the first time since the end of 2023.

Ask AI · Why do retail investors choose their first net selling during a stock market rebound?

U.S. retail investors—over the past few years the most reliable “buy-the-dip” force in the U.S. stock market—are sending warning signals to the market.

Citing data from Vanda Research via Bloomberg, retail investors recorded their first single-day net selling since November 2023 this past Monday, dumping about $20.6 million worth of individual stocks.

Meanwhile, the Citadel Securities indicator that tracks retail investors’ risk appetite has fallen sharply from its February peak, suggesting that confidence among individual investors in the outlook for the stock market is wavering. Although retail investors returned to being net buyers on Tuesday, the timing of this signal is quite sensitive—the S&P 500 has already fallen nearly 5% this month.

A cooling off in retail buying adds another layer of concern for the market. During the bull market over the past three years, retail’s purchasing power played a steady role in each round of fluctuations. Now this force is starting to loosen, and the impact on the already pressured U.S. stock market should not be underestimated.

First net selling: the significance of the signal outweighs the size

Vanda Research data shows that retail investors net sold about $20.6 million worth of individual stocks on Monday, the first single-day net selling since November 2023. This shift happened against the backdrop of an intraday rebound in the S&P 500—at the time, the threat of President Trump bombing Iran’s energy infrastructure eased somewhat, and market sentiment briefly improved.

Although on Tuesday retail investors switched back to being net buyers—by 12:50 p.m. Eastern time, they had bought about $262.3 million worth of stocks in total—this brief “defection” in itself already has signal value. In a report published on Tuesday, Vanda macro strategist Ruta Prieskienyte wrote: “Since early March, retail participation has been gradually ebbing, while systematic deleveraging continues to move forward, and buy-side positioning by longs and hedge funds against the market has only been moderate.”

Beyond the net selling data, broader sentiment indicators also point to retail confidence fading. Citadel Securities’ measure of retail investors’ risk appetite has dropped significantly from its February peak, indicating that individual investors’ optimistic expectations for the stock market are being systematically dialed back.

Vanda Research notes that the ongoing stalemate in the Middle East is an important background behind continued weakness in retail demand. As geopolitical uncertainty weighs on market sentiment, retail investors’ willingness to add positions on dips has clearly diminished—sharply contrasting with the behavior pattern of actively stepping in at the time of prior pullbacks.

Why the marginal change in retail’s impact is worth paying attention to is that this group’s influence on Wall Street has increased substantially. According to data from JPMorgan Chase, in 2025 individual investors set a record for the highest annual net inflows ever, with a scale nearing twice the average level over the past five years—17% higher than the record level in 2021, and nearly 60% higher than the 2024 level.

It is precisely this sustained and large-scale buying force that has provided key support for the market through multiple rounds of turbulence during the bull market over the past three years. Now, as signs of cooling retail enthusiasm appear, whether the market can continue to receive this kind of buffer during periods of volatility has become a variable investors need to reassess.