MW Everyday investors keep making Wall Street pros look dumb with this one simple move

By Joseph Adinolfi and Gordon Gottsegen

When stocks plunged in early April after the announcement of President Donald Trump's tariffs, Noah Hackett knew what to do. The 19-year-old student at West Chester University, a public college in Pennsylvania, bought the dip.

Hackett purchased $500 worth of exchange-traded funds that tracked the U.S. stock market, placing his trades on April 7 and April 8 through Robinhood, the trading platform that has been fueled by young and inexperienced investors. A friend at school also rushed to buy stocks, ignoring the apocalyptic messaging blaring in the news media. The two college kids had experienced similar warnings in March 2020 when COVID-19 upended global markets and the economy. The episode had stuck with them.

"I wasn't too afraid of the long-term tariff impact," Hackett said. "I always just thought it would bounce back pretty quickly."

Two days after Hackett finished buying the dip, his father appeared on CNBC and sounded a more cautious tone. The chief market strategist at insurance giant Nationwide, Mark Hackett said the market was acting strangely and he expected more volatility with stocks rising and falling.

"It is still a very emotional market," Mark Hackett said. "When we look forward, we still don't think we are going to be off to the races here. I think we are probably going to get some choppiness before you have a sustained recovery."

Mark Hackett's view reflected the sentiment among Wall Street professionals that Trump could drive more uncertainty in the stock market. The way he saw it, stocks were completely at the whim of Trump and any indication that Trump might walk back some of the aggressive tariffs he had unveiled could spark a powerful turnaround. But Mark Hackett also thought that the longer some of the tariffs remained in place, the worse the situation in the financial markets would likely become. It was a difficult environment for any investor to navigate and he just didn't know which way things were going to break.

Still, he supported his son's decision to buy the dip, given his youth and risk tolerance. "I was on board, but I wanted it to be his call," Mark Hackett told MarketWatch.

The nation's Noah Hacketts, everyday investors known on Wall Street as "retail" traders, rapidly propelled the stock market higher and within weeks stocks erased all the losses associated with Trump's early April tariff announcement. It was one of the most stunning comebacks in Wall Street's history.

After a 15-year stretch where stock-market losses have often been short-lived, buying the dip has become like a reflex for entire generations of amateur investors. Many professionals on Wall Street feared that Trump's tariff agenda might finally put an end to all of that. But while big Wall Street institutional investors fled stocks in April, an army of amateur investors stepped up to buy the dip with both hands.

Data from JPMorgan Chase & Co. $(JPM)$ showed that April was one of the most aggressive months of buying by the retail cohort in recent memory. Since April 8, a team of analysts at JPMorgan estimated that individual investors had bought $50 billion in stocks. At times, they accounted for roughly a third of daily trading volume. It was retail investors, with an assist from corporations buying back their own shares, that helped power the stock-market rebound.

They have been swiftly rewarded for their temerity. Data shared with MarketWatch by discount-brokerage operator Public found that customers who bought, and held, stocks or ETFs after Trump's "liberation day" were sitting on gains of roughly 12%, accumulated in just over one month.

Those returns largely eluded their professional peers. A wealth of data published by Wall Street trading desks over the past few weeks has shown that institutional investors and hedge funds were net sellers of stocks. Then they sat out the early stages of the rebound as many expected the impact of Trump's tariffs would be quickly felt in the economic data. HFR's asset-weighted index of hedge-fund returns showed a marginal loss for April.

This week, on the first trading day after Moody's became the last major credit agency to downgrade U.S. government debt, stocks dropped in morning trading, but by the end of the session they had climbed higher and made gains for the day. Yet again, retail traders had bought the dip and purchased $4.1 billion of stocks by midday, according to JPMorgan, the biggest intraday retail inflow ever recorded.

"Why yesterday's U.S. downgrade sell-off could not last one day," wrote Jim Bianco, president of Wall Street research firm Bianco Research, on social-media platform X, in response to the JPMorgan data. "The bigger issue is, retail is now the dominant force in equities. Of lesser importance is what the 'whales' (hedge funds and other institutions) are doing."

'It was a no brainer'

Eric Sanchez, a 51-year-old manager at a beverage company based in Connecticut, had a feeling that investors were overreacting to Trump's "liberation-day" tariff announcement.

So starting on April 4, he bought hundreds of shares of chip behemoth Nvidia $(NVDA)$. A couple of weeks later, as the market recovered, Sanchez started buying shares of Palantir Technologies Inc. (PLTR) as well.

"Everybody was panic-selling because of tariffs, but tariffs could come and go," Sanchez told MarketWatch. "I was ready to deal with it for a couple of months or even longer. It was like getting a good product on a discount - it was a no-brainer."

Sanchez was also motivated, in part, by the fear of missing out, or FOMO. He told MarketWatch that he regretted not buying shares of Big Tech heavyweights like Amazon.com Inc. $(AMZN)$ and Microsoft Corp. $(MSFT)$ during the aftermath of the dot-com-bubble implosion decades ago.

Eric Anderson, 35, who works with Sanchez, started buying the dip even before "liberation day."

As the market drifted lower in March, he scooped up shares of Amazon.com and Microsoft as the Big Tech "Magnificent Seven" stocks got beaten up in the wake of the DeepSeek surprise. "When we got those big drops in the Mag Seven, I felt like that was an opportunity to add to those names," Anderson said during an interview with MarketWatch.

When the market began to recover after Trump's April 9 decision to pause some of the levies, Anderson shifted to buying shares of Nvidia and Strategy Inc. (MSTR), the company formerly known as Microstrategy that owns more than 570,000 bitcoins (BTCUSD), a haul worth more than $60 billion at current prices, according to information available on Strategy's website.

When markets turn rocky, Anderson said he likes to ask himself a simple question: Is he confident the stock he's looking to buy will be trading higher within five years? If the answer is 'yes,' he hits the buy button.

"I try not to invest money that I'm going to need over the next five to 10 years. It's money I plan on leaving in the market for an extended period of time," he said.

The everyday investors buying the dip have confounded some of the most prominent names on Wall Street. At his bank's annual investor meeting on Monday, JPMorgan Chase CEO Jamie Dimon said consumers have yet to feel the full effects of Trump's tariffs and that markets are reflecting an "extraordinary amount of complacency" given risks associated with inflation, stagflation and geopolitical developments.

Some of the biggest billionaire hedge-fund traders on Wall Street have recently expressed cautious views on U.S. stocks. Just last week, Steve Cohen, who runs Point 72 Asset Management, said stocks could retest their April lows and put the odds of an economic recession at 45%. Paul Tudor Jones, the famed macro trader, has also said he expects stocks could fall to their April lows.

Although buying in while share prices are in freefall may seem like a risky move, it can sometimes be the opposite, said Chris Galipeau, senior market strategist at Franklin Templeton.

"Most people forget this. When stock prices come down, so does the risk in owning them," Galipeau told MarketWatch. He pointed out that stocks often trade based on their price-to-earnings ratios. When the price drops and earnings stay the same, it could reflect an opportunity to buy stocks at a better value.

Steve Quirk, the chief brokerage officer at Robinhood (HOOD), said that it's important for investors to learn from each market downturn so they make better decisions the next time volatility hits stocks.

"I'm thinking of it through the lens of Robinhood customers, who are younger and haven't been through many things like this. They were too young for Brexit or the financial crisis," Quirk told MarketWatch. "You actually need to see some of these. It gives you good experience in how to deal with the next one."

In recent years, the steady retail-driven rebounds in any stock pullback has inspired a fair amount of soul-searching among professional money managers, said Mark Hackett. For years, hedge funds were known on Wall Street as the "smart money." Now, "dumb money" retail traders are beating them at their own game.

"We as an industry are so arrogant, we think we know everything. But right now the retail investor is acting in a disciplined way, and it's the institutional investors who are acting emotionally. It's the reverse of history," Mark Hackett told MarketWatch, recalling his experience working for Wall Street investment firms. "I spent 15 years on the buy side. When you're in an investment meeting, and you see a 10% day and you're on the sidelines - let me tell you, it's a bad meeting."

-Joseph Adinolfi -Gordon Gottsegen

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May 21, 2025 10:01 ET (14:01 GMT)

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