Trump volatility fatigue: Retail traders aren't buying the dips like they used to

Retail investors have led the buy-the-dip and “TACO” trades over the past year. Lately, though, they’ve lost a lot of steam. Retail flows fell to $3 billion in the week beginning on March 19 and ending March 25, below the 12-month average of $6.8 billion, according to JPMorgan. Overall, stock purchases from retail traders has also fallen sharply, making up just 30% of levels seen before the U.S.-Iran war. For the past year, everyday investors have used market pullback as buying opportunities, especially around proclamations from President Donald Trump. The TACO strategy — shorthand for “Trump Always Chickens Out” — came to prominence in 2025 as President Donald Trump threatened to impose steep tariffs with a slew of imports, only for the commander to back off or impose less-severe duties. Sectors impacted would fall, then investors would swoop in and reap the gains after Trump backed off. Buying dips in general was also a successful approach for retail investors in 2025, which marked one of the strongest years for retail trading activity. However, since the start of the conflict in the Middle East, the stock market has experienced high volatility due to rising oil prices and concerns about inflation. This caused retail traders to pull back. The S & P 500 is down around 5% since the war began in late February. .SPX mountain 2026-03-02 SPX in March “The trend since the start of March has been one of gradually receding retail participation, alongside systematic deleveraging and only modest buying from long-only and hedge fund investors on the other side,” Vanda Research wrote Tuesday. The week began with low optimism from retail investors despite a major market surge. Everyday traders sold $20.6 million of single stocks on Monday, the first day of net selling since November 2023, Vanda data shows. That day, however, the S & P 500 soared 1.2% after Trump signaled the U.S. and Iran discussed an end to the war. To be sure, Iran denied the talks took place. “Monday stood out as particularly weak: despite a broader return to market enthusiasm, retail appeared to capitulate — turning net sellers for the first time in 9 months as they ‘sold the rip,’'” wrote JPMorgan strategist Arun Jain. While overall retail trading activity stabilized by Tuesday, single stock trades among retail investors fell to the lowest since December on Wednesday, JPMorgan noted. That said, there were some favorite individual names among the mom-and-pop trading cohort. Retail investors this week favored megacap and “Magnificent Seven” stocks such as Nvidia , Tesla and Microsoft , with consumer staples leading against other sectors, per JPMorgan. Conversely, energy, technology and industrials experienced the most selling. All three major indexes were down on Thursday. The Nasdaq declined by 1.13%, the S & P 500 was down 0.71% and the Dow Jones Industrial Average fell by 0.24%