According to the latest data from Vanda Research, over the past four weeks, the net balance between inflows and outflows into U.S. equities has narrowed to $13 billion, the lowest level since the outbreak of the pandemic in 2020. Although overall market trading remains active, retail investors’ selling pace has almost kept up with buying, causing their net positions to fall back to levels not seen since 2020.
This shift reflects that the investor base is becoming more cautious and discerning. 2026 is evolving into a true “stock picker’s year.”
The once highly sought-after tech “Magnificent Seven” are now facing a large-scale exodus by retail investors. Citigroup data shows that in the five trading days ending June 26, retail trading accounted for only 6% of the total trading volume of this group, marking the lowest level in four years. Within the group, NVIDIA (NVDA) has taken the most significant hit, with its retail trading share falling to 8.1% from 9.6% in the previous week; Tesla (TSLA) is relatively the most watched among them, with a share of 10%, but it is also approaching lows not seen since 2022. Meanwhile, the group has underperformed overall this year, with a cumulative decline of 3.1%, while the S&P 500 has risen 8.7% over the same period.
Viraj Patel, Global Macro Strategist at Vanda Research, stated that the sharp decline in net retail buying activity does not mean trading has stopped, but rather that the way of participating has undergone a fundamental transformation. Today, retail investors, like institutional investors, have entered a phase of stock-picking. The behavioral patterns of 2026 are starkly different from the post-pandemic era: they are no longer broadly buying AI-related stocks or the “Magnificent Seven,” but are rotating rapidly among various hot themes—focusing on energy stocks and energy ETFs at the start of the year, shifting to silver ETFs and non-U.S. markets in February, chasing the semiconductor sector in April, and quickly switching to cryptocurrency ETFs in June. Research indicates that retail speculative capital is being diverted to cryptocurrencies, prediction markets, sports betting, and various alternative assets, and the battlefield for finding “ten-baggers” is no longer confined to the stock market.
The latest survey from the American Association of Individual Investors (AAII) shows that for the week ending July 8, 37.2% of respondents held a pessimistic view on the stock market over the next six months, exceeding the 36.3% of optimists and significantly higher than the historical average bearish ratio of 31.0% in the survey. More notably, since mid-February, except for four weeks, the number of bears has consistently outnumbered bulls, and bullish sentiment has been below the historical average for seven consecutive weeks. This persistent caution stands out particularly as U.S. stocks approach record highs.
Vanda Research points out that platforms such as cryptocurrency trading, prediction markets, and sports betting are all competing for the same pool of “risk-seeking capital.” Meanwhile, Citigroup data shows that retail funds are shifting from individual stocks to related ETFs, which has also become one of the important reasons for the decline in the trading share of individual “Magnificent Seven” stocks.
Vanda Research emphasizes that the current decline in retail net positions does not constitute a bearish signal. The real risk lies in “crowded positions” rather than “light positions.” When retail investors have not yet piled in heavily, the market lacks forced selling pressure; if funds flow back in the future, it could also become a new driving force for pushing the index higher. Etoro analyst Bret Kenwell believes that the slowdown in retail demand reflects market concerns about overall valuations, especially the high valuations of tech stocks. Meanwhile, JPMorgan data shows that this week, retail net purchases of stocks amounted to $8.9 billion, still above the average of the past 12 months, indicating that the willingness to “buy the dip” has not completely disappeared.
