The S&P 500 is being “abandoned”! Net inflows into US stock retail accounts hit a post-pandemic low: they don’t buy the broad market, they just bet on hot trends

Retail investors are shifting from steadfast supporters of the US stock market to cautious theme hunters, with their willingness to place overall bets on the broader market falling to the lowest level since the pandemic.

According to Vanda Research data, net inflows of retail funds into US stocks have dropped to only $13 billion over the past four weeks, the lowest since the pandemic. Behind this figure is a balancing of retail buying and selling behavior—they are buying and selling with nearly equal intensity, rather than continuously adding net positions as in the past few years.

This shift is an important signal for market sentiment. Retail investors have been a key driver behind the US stock market rally in this decade; their confidence fading means that a crucial force supporting the broader market is weakening. However, analysts note that this does not necessarily imply an overall downside for US stocks, and more reflects that retail is switching its behavior pattern from “buying the whole market” to “chasing themes.”

Retail enthusiasm cools; waiting for pullbacks amid theme rotation

Vanda Research global macro strategist Viraj Patel said, "A more selective retail investor is joining similarly selective institutional investors—in 2026, it really becomes a game for stock pickers."

Since the beginning of this year, retail investors’ capital trajectories have clearly shown characteristics of theme rotation: first, energy stocks and silver-related companies were chased due to a surge in industrial demand and supply shortages; then the software sector briefly became the focus; afterward, it was replaced by semiconductors. After SpaceX’s IPO in June, retail investors quickly poured into the company led by Musk, which combines rockets, satellites, and artificial intelligence business, as well as other space-related concept stocks.

Sentiment survey data from the American Association of Individual Investors (AAII) supports the above view. Since mid-February, the number of pessimists has outnumbered the number of optimists in most weeks, with only four exceptions. For the week ending July 8, 37% of respondents said they are pessimistic about the stock market over the next six months, while 36% said they are optimistic.

eToro US investment analyst Bret Kenwell believes that the potential cooling in retail participation stems both from concerns about the broader market’s overall trend and from technology stocks’ valuation being high after their sharp rise this year. "Chip stocks are in a consolidation phase after a big rally in the second quarter, and retail investors may be unwilling to add new funds to a sector they believe has already been overvalued in the short term," he said. "If investors are indeed waiting, they may be just waiting for the current pullback or the end of the consolidation phase before re-entering."

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