Amid a panic sell-off on Tuesday local time, triggered by turmoil in the Japanese bond market and geopolitical uncertainties, retail investors seized the opportunity to buy the dip aggressively, recording the third-largest single-day buying volume of the year and driving the week's net purchases by retail investors to a staggering $12.9 billion, reaching a significant peak. This move accurately capitalized on the so-called "TACO" (Trump Actually Cares about Optics) strategy, which posits that market volatility induced by Trump's remarks will quickly reverse.
Looking at a longer timeframe, data from JPMorgan indicates that over the past 21 trading days, the cumulative net purchases by retail investors have, for the first time, surpassed the historic threshold of $45 billion. Compared to last year's event-driven short-term bottom-fishing, this round of buying demonstrates greater sustainability, signaling a shift in retail sentiment from risk aversion to proactive allocation.
On Wednesday local time, Trump's remarks at the World Economic Forum in Davos boosted risk appetite, and the market reversed as retail investors had anticipated. Trump showed a noticeable shift in stance, not only abandoning his previous tariff threats related to Greenland issues but also ruling out the possibility of using military force. According to Xinhua News Agency, U.S. President Trump stated in a social media post that he and NATO Secretary-General Rutte have established a framework for a future agreement concerning Greenland, and therefore, the tariffs originally scheduled to take effect on February 1st against eight European countries will not be implemented.
Notably, this year, the scale of retail buying in ETFs and individual stocks has been roughly balanced, altering the previous allocation structure that was predominantly focused on ETFs. This indicates a more diversified and active investment strategy from retail investors. The subsequent market rebound following Trump's related statements once again confirms retail investors' adept timing in navigating the interplay between policy narratives and market sentiment.
Precious metals regained favor. Previously, as Trump issued potential tariff threats towards Europe concerning Greenland, market避险情绪 (risk-off sentiment) heated up, and precious metal ETFs once again became a hot spot for retail buying, jumping to the second position among all categories. Simultaneously, international equity ETFs also saw exceptionally large-scale inflows, nearing the upper percentile of historical records.
Within the overall ETF purchases, broad-based equity ETFs contributed approximately 40% of the share, ranking first in weekly buys (sitting at the 98th percentile), primarily driven by robust inflows into QQQ (inflow volume reached 2.4 standard deviations above the mean), SPY, and VOO.
On the other hand, influenced by the US cold wave, natural gas futures surged about 50% within two days, prompting retail investors to accelerate profit-taking from related ETFs like BOIL and UNG. Unlike the safe-haven attributes of precious metals, cryptocurrency ETFs exhibited an "anti-gold" trading characteristic in early 2026, also experiencing outflows, with currency-focused ETFs showing only low activity at the 4th percentile yesterday.
Tech stocks dominate individual stock buying. In terms of individual stock purchases (sitting at the 84th percentile), the technology sector remained the primary destination for retail capital, followed by non-essential consumer goods and communication stocks. Although the "Magnificent Seven" continued to dominate retail trading in 2025, recent capital flows have shown a trend of spreading towards a broader range of targets.
This week, Tesla and Amazon continued to rank at the forefront of net retail buying, with Netflix, Micron, TSMC, and Intel also receiving significant attention. In contrast, Apple remained a persistent target of net selling, serving as one of the primary sources for retail investors reallocating funds.
In the options market, retail participation remained consistently high. Actively traded contracts were mainly concentrated on individual stocks like Tesla, NVIDIA, Meta, AMD, Google, Micron, Microsoft, and Apple, as well as precious metal ETFs such as SLV and GLD.
JPMorgan pointed out that retail investors' strategies for coping with market fluctuations have shifted from last year's ETF-dominated approach to a more balanced allocation between individual stocks and ETFs, reflecting a further maturation of their risk tolerance and investment strategies.
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