Buying the Dip Still Works — Even in This New World

Retail investors have won again. When trade tensions flared in early April and about $6.6 trillion in market value vanished from US stocks in just two business days – the fifth-worst two-day drop since the S&P 500’s creation in 1957 – they didn’t panic. Instead, they did what they’ve learned to do over the past 15 years: They bought the dip. Six weeks later, the US stocks benchmark has not only recovered but surpassed its pre-tariff levels, delivering a gain of about 17% from the lows to those who kept their nerve.

Individual investors have become an increasingly powerful force in markets. At the end of 2024, they collectively held $35 trillion in US stocks – 38% of the market, according to Federal Reserve and Goldman Sachs Group Inc. data. And they’re not afraid to trade: They came into the year accounting for about 19.5% of US equity-trading volume, according to Bloomberg Intelligence analyst Larry Tabb – up from 17% a year prior and well above pre-pandemic levels. While this is below the 24% peak reached during the meme-stock frenzy at the beginning of 2021, commission-free trading has created a sustainably higher level of retail engagement.