November: U.S. retail investors hit by “targeted attacks”—indexes show modest declines, individual stocks plunge into a “bear market,” crypto suffers a bloodbath.

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Although the major U.S. stock indexes did not seem to drop much in early November, beneath the surface a wave of selling in speculative assets is taking place.

Since November, many stocks previously popular among retail investors have been hit hard. According to Goldman Sachs data, the portfolio tracking stocks favored by retail investors dropped 10% in November, heading toward the worst single-month performance since 2022. Meanwhile, an ETF that tracks "meme stocks" saw its market value evaporate by a quarter.

The cryptocurrency market has not been spared either. Bitcoin prices dipped below $95,000 for the first time in seven months, erasing over $1 trillion in total market value. This extreme volatility is severely testing the resilience and investment conviction of retail investors.

Amy Wu Silverman, head of derivatives strategy at RBC Capital Markets, warns that the risk is that the long-held collective belief among retail investors that “the market always goes up” may start to waver, as losses are now concentrated in those stocks that made them rich this year.

Surging Volatility Tests Retail Investors’ Resilience

Unlike the relative stability of the major indexes, the pain in November’s market is highly concentrated, mainly affecting those speculative assets heavily favored by retail investors.

Momentum stocks are falling, and once highly sought-after AI concept trades are experiencing sharp reversals. These are the areas with the deepest losses this month.

According to JPMorgan data, retail investors put just $652 million into U.S. stocks on Thursday, which is only at the 24th percentile of the past year. Based on the one-month moving average of Barclays’ equity enthusiasm index, retail participation in stocks has shown a “significant decline” in a short timeframe.

Charlie McElligott, managing director of cross-asset strategy at Nomura Securities, says there is no doubt November has delivered a massive “negative” wealth effect blow to retail investors. He said:

Portfolio losses, especially in stocks and cryptocurrencies, erode the sense of wealth, which in turn can negatively impact mood, spending, and consumption.

Faith in the Cryptocurrency World Wavers

The ongoing slump in the cryptocurrency sector is another telling sign. Since the flash crash on October 10, there are nearly no signs of relief from the market shockwaves.

Bitcoin dropped as much as 5% on Friday, widening its cumulative November decline to around 20%. Bitcoin ETFs also suffered their second largest outflow since their inception on Thursday.

ETFs related to the “Bitcoin treasury” company Strategy have also become some of the biggest losers this month. Among 16 funds, 12 recorded double-digit losses in November, and three leveraged funds fell more than 40%.

This scene shows that investors’ willingness to pay premiums for high-conviction leveraged models is rapidly fading.

Retail Investors Still Holding Fast in Some Areas

Despite the pressure, retail investors are still showing buying interest in certain areas.

U.S. stock ETFs saw over $9 billion in inflows on Thursday when the market plunged.

According to Fidelity’s brokerage unit, as of Thursday, retail investors were still buying up stocks of Nvidia, Tesla, and Palantir, even as nearly $300 billion in market value evaporated due to declines in those companies.

On Friday, S&P 500 futures rebounded nearly 2% from Asian session lows, with the presence of retail investors evident.

However, analysts believe the market rebound seems more like a relief rally rather than a sign of full recovery. Whether the stock market can resume its upward momentum before year-end now increasingly depends on Nvidia’s earnings next week. Investors will be looking to confirm whether artificial intelligence remains a sustainable long-term investment.

Notably, the day after Nvidia’s earnings release, the U.S. Bureau of Labor Statistics will announce the non-farm payroll data for September on the evening of November 20.

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