S&P 500 "abandoned"! Net retail inflows into U.S. stocks fall to lowest level since the pandemic: not buying the index, only betting on hot stocks

```

Retail investors are shifting from being staunch supporters of the U.S. stock market to cautious theme hunters, with their willingness to make broad bets on the market at its lowest level since the pandemic.

According to Vanda Research, net inflows from retail investors into U.S. stocks over the past four weeks have totaled only $13 billion, the lowest figure since the pandemic. Behind this number is the balance of buying and selling behavior—retail investors are buying and selling with almost equal strength, rather than consistently increasing their net holdings as they did in previous years.

This shift has important implications for market sentiment. The retail crowd was an important driver of the U.S. market's rise this decade, and their waning confidence means a key pillar supporting the market is weakening. However, analysts point out, this does not necessarily signal a broad market downturn, but rather reflects the behavioral shift of retail investors from "buying the broad market" toward "chasing themes".

Retail enthusiasm cools, waiting for pullbacks to enter in sector rotations

Vanda Research global macro strategist Viraj Patel said, "A more selective retail investor is joining the ranks of equally selective institutional investors—2026 will truly be a stock picker’s market."

Since the beginning of this year, retail investors’ funding flows have clearly shown sector rotation characteristics: first, energy and silver-related companies were sought after due to surging industrial demand and supply shortages, then the software sector became briefly the focus, followed by semiconductors taking the stage. After SpaceX’s listing in June, retail investors quickly flocked to Musk’s company—which combines rockets, satellites, and AI—as well as other aerospace concept stocks.

Sentiment survey data from the American Association of Individual Investors (AAII) supports the above conclusions. Since mid-February, there have been more bears than bulls in most weeks, with only four weeks as exceptions. For the week ending July 8, 37% of respondents held a bearish outlook for the next six months, while 36% were optimistic.

eToro U.S. investment analyst Bret Kenwell believes that, the cooling of retail participation is not only due to concerns about the overall market, but also because tech stocks' valuations have become stretched after this year's rally. "Chip stocks are consolidating after a surge in the second quarter, so retail investors may not want to add new funds to sectors they see as overvalued in the short term," he said. "If investors are indeed on the sidelines, perhaps they are just waiting for the current pullback or consolidation to end before re-entering."

Risk Warning and DisclaimerThe market carries risks; investment requires caution. This article does not constitute personal investment advice, nor does it take into account individual users’ specific investment objectives, financial situations, or needs. Users should consider whether any opinions, viewpoints, or conclusions in this article suit their particular circumstances. Investments based on this are at your own risk. ```