Wall Street was not short of skeptics, with many believing Tuesday's stock market plunge was merely a short-term phenomenon and that the extent of this correction was insufficient to persuade President Donald Trump to abandon using trade war tactics in the dispute over control of Greenland. However, one group remained unconvinced by this view: retail investors. Data from JPMorgan Chase & Co. shows that retail investors defied the trend, pouring a massive $4 billion into the U.S. stock market as the S&P 500 suffered its largest single-day drop in three months. The following day, Wednesday, saw an additional $2.3 billion flow into the market. Coinciding perfectly with this influx, Trump moderated his previously强硬 stance on tariff threats, directly igniting a market rebound. U.S. stocks surged 1.2% that day and gained another 0.6% on Thursday, nearly erasing the initial decline. For retail traders, "buying the dip" has long been an implicit operating principle. This strategy was born during the bear market triggered by the COVID-19 pandemic in 2020, matured during the meme stock frenzy of 2021, and has now, in Trump's second term, spawned a new corollary—an investment logic playfully dubbed the "Trump Acquiescence Trade" (TACO) by the market. Its core premise is that any stock market decline caused by threats of punitive tariffs presents a prime buying opportunity. This logic proved true in April of this year, worked throughout the summer, and was validated once again this week. Lale Akoner, Global Markets Strategist at eToro, stated, "Retail appetite to enter the market is exceptionally strong. Despite market volatility driven by tariff-related news, geopolitical uncertainty, and policy noise from Davos, individual investors are still actively stepping in. Inflows of this magnitude indicate that retail sentiment towards risk assets overall remains optimistic." Exchange-Traded Funds (ETFs) served as the primary vehicle for these inflows. JPMorgan data indicates that over the five trading days from January 14th to January 21st, broad-market equity ETFs hit a record high for rolling weekly inflows, accounting for approximately 40% of total retail ETF purchases. The main contributors to these inflows were popular products like the Invesco QQQ Trust Series 1, the SPDR S&P 500 ETF Trust, and the Vanguard S&P 500 ETF. Kevin Xu, a former retail trader and current CEO of the retail chat app Alpha, said, "Everyone has Trump's playbook figured out now. He starts with a major threat, and then backs down once he gets what he wants. The market often overreacts to this, which恰恰 creates an excellent buying opportunity." This buying frenzy represents a continuation of a year-long pattern of positive feedback for this strategy. Its origin can be traced back to January 2025, when the launch of the Chinese AI application "DeepSeek" caused a brief, sharp plunge in the share prices of U.S. tech giants. The most iconic "buy-the-dip" opportunity emerged three months later: Trump's initial rollout of tariff policies led to double-digit percentage declines in stocks, but he announced a compromise less than a week later, triggering the largest single-day percentage gain for U.S. stocks in forty years. JPMorgan strategist Arun Jain pointed out, "The current scale of retail inflows is comparable to several major 'buy-the-dip' episodes from last year. Unlike some previous short-lived spurts, the upward momentum since the New Year has persisted unabated, driving retail trading activity to a rolling monthly record high." Retail traders account for nearly a quarter of U.S. stock market volume, and their recent activity is also evident in other market segments. A deep freeze affecting the entire U.S. drove natural gas futures prices sharply higher, prompting retail investors to initiate a wave of profit-taking, accelerating sales of the Bloomberg Natural Gas Double Long ETF. At the individual stock level, the technology sector remains the primary focus for retail capital, followed by the consumer discretionary and communication services sectors. Although retail stock trading in 2025 was concentrated in the "Magnificent Seven," investors are now beginning to diversify their holdings. This week, Tesla and Amazon remained the top holdings for retail investors, with Netflix, Micron Technology, Taiwan Semiconductor Manufacturing Company (TSMC), and Intel also seeing significant interest. Netflix reported earnings on Tuesday, with several other tech companies scheduled to disclose their results next week. Retail traders are also continuing to increase their bets in the derivatives market, using leverage to amplify their investments. Data compiled by Scott Rubner, Head of Equity and Equity Derivatives Strategy at Citadel Securities, shows that the daily average stock trading volume and options contract volume from retail investors are more than 40% higher than the January average for the 2020-2025 period. Rubner added that, overall, retail flows have been net positive for seven consecutive weeks and have been net inflows in 37 out of the past 38 weeks. This trend further confirms the market view that individual investors remain a strong bullish force supporting the U.S. stock market.
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