Retail Trader Enthusiasm Wanes as Institutional Interest Gears Up

After a skittish summer for US stocks, some retail investors are throwing in the towel, while many of their institutional counterparts view the recent slump as a chance to purchase shares.

(Bloomberg) — After a skittish summer for US stocks, some retail investors are throwing in the towel, while many of their institutional counterparts view the recent slump as a chance to purchase shares.

The American Association of Individual Investors’ closely-watched survey on retail sentiment showed bears outnumbering bulls for the first time since June, reflecting a spread of -3.6 in the week ending August 24. Retail optimism had hit the highest since April 2021 last month, just before this month’s churn.

It’s not just surveys that reveal the new-found pessimism. Bank of America Corp. data showed retail clients fled US stocks for two-straight weeks as the S&P 500 Index slid in August. By contrast, the institutional and hedge fund cohort piled $4.4 billion into shares last week, the largest inflow in two months among BofA clients.

Activity tracked by JPMorgan Chase & Co. also showed retail traders sold $1.4 billion of single stocks in the past week, marking a fifth-consecutive week of net sales. Despite the bearishness, however, they crowded into Nvidia Corp. ahead of its earnings and bought the dip in shares of Apple Inc. as it posted day-after-day losses.

The S&P 500 dropped 0.9% as of 3:13 p.m. ET on Thursday after reversing an earlier gain. The U-turn came as investors shifted their focus from Nvidia’s blowout results to upcoming remarks by Federal Reserve Chair Jerome Powell at the Jackson Hole central bank symposium.

While US stocks have struggled to recover from this month’s declines, much of Wall Street has said the pullback was expected in an overheated market. Some are even waiting to scoop bruised-up shares.

Citigroup Inc.’s Scott Chronert said a further fall in the S&P 500 to 4,200-4,300 could create an attractive re-entry point. HSBC Holdings Plc strategist Max Kettner is awaiting a renewed selloff to scale up the firm’s US equity exposure.

The percentage of investors in the AAII survey with a bearish view over the next six months rose to 35.9%, while those with a bullish view fell to 32.3%. The share of those with a neutral view fell to 31.8%.

  • AAII bull-bear spread sank to -3.6 from 5.8 last week
  • Bulls fall to 32.3% from 35.9%
  • Neutrals fall to 31.8% from 34%
  • Bears jump to 35.9% from 30.1%
  • See AAIIBULL GP, AAIIBEAR GP, AAIINEUT GP, .AAIIBB GP

–With assistance from Bailey Lipschultz.

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