Retail traders in the U.S. are still throwing money at falling stocks, and it’s blowing up in their faces. It’s 2025, Donald Trump is back in the White House, and markets have gone completely off the rails.
But that hasn’t stopped everyday investors from diving headfirst into losses, convinced every dip is a chance to strike gold. It’s not working.
Between January and March, retail traders bought more than $2 billion worth of stocks on 16 separate days, according to data from JPMorgan. That level of buying had only happened four times total in the last two years. The timing has been brutal. The bounces aren’t sticking. The dips keep dipping. And people keep buying anyway.
Traders keep buying while losses double the market’s drop
A JPMorgan model portfolio that tracks how retail investors move money into the stock market shows they’re already down 7% this year. That’s double the decline of the S&P 500, which is down about 3.5% in the same time. The aggressive buying from mom-and-pop investors has analysts worried that the market hasn’t actually hit bottom yet.
Big funds are watching. They know retail traders are usually the last ones to cut losses. When these folks are still buying with both hands, Wall Street assumes there’s still more pain coming.
The environment has changed fast. Bitcoin is down. Big Tech is bleeding. The dollar’s sliding. The old strategy of buying dips just isn’t working anymore. Trump’s second term has brought policy chaos that’s turning everything upside down. U.S. government bonds, European stocks, and commodities—assets that were left for dead last year—are now outperforming. Everything that worked last year is suddenly trash.
And while small traders are getting crushed, Wall Street veterans are back to pushing boring stuff like “diversification.” Their decades-old message about spreading risk across different markets is actually making money this year.
A fund called the Cambria Global Asset Allocation ETF (GAA), which invests in stocks, bonds, real estate, and commodities, is up by more than 6 percentage points ahead of the S&P 500. If that performance holds, it’ll be the best year for the fund since it launched in 2014. It’s a win for the old guys.
Still, some aren’t convinced the lesson has sunk in. Alicia Levine, who leads investment strategy at BNY Wealth, said, “All you got to do is ‘buy the dip’ — I think we need an environment to change that before the psychology of the investor really says, ‘maybe I should be more cautious and be more diversified.’”
Trump’s policies and Big Tech dependence rattle investors
The S&P 500 just dropped 10%, and investors are spooked. But it’s not clear what exactly set off the panic. Some blame the wild policy decisions coming out of Washington. Others point to the heavy weight of the Magnificent Seven—the seven tech giants that make up nearly a third of the S&P 500.
Two big problems are playing out. The first is easy to see: Trump’s non-stop policy announcements, especially around trade. Companies are scrambling to figure out which sector gets hit next. And for once, even usually quiet corporate execs are openly criticizing the administration’s direction on the economy.
The second problem is harder to see, but more dangerous. For years, Apple, Microsoft, Nvidia, Amazon, Alphabet, Meta, and Tesla have carried the stock market on their backs. Now, they’re slowing down. And when they fall, they drag the whole index down with them.
During the recent selloff, every single one of the Magnificent Seven went red. Their median decline? 14.4%. Their combined drop made up nearly half of the S&P 500’s total loss. The rest of the index held up better. If you remove those seven companies, about 25% of the S&P actually posted gains. For the rest, the median decline was 6.6%.
And it’s not just about trade policies. The selling hit tech stocks hardest, even though tech is one of the few sectors that isn’t directly in the line of fire from Trump’s tariffs. In fact, VeriSign was the only tech company that gained during the drop. Meanwhile, companies like Ford and Kroger, which should be more exposed to trade risk, actually posted gains.
So it wasn’t tariffs. It was Big Tech. Investors seem to finally be waking up to the reality that these massive companies can’t keep growing forever. The U.S. economy is slowing. Inflation is still running above the Fed’s 2% target. Even Fed Chair Jerome Powell said this week that inflation “remains sticky.”
Big Tech’s slowdown threatens the entire S&P 500
Bond markets saw this coming. Two- and ten-year Treasury yields have been dropping in recent weeks. The five-year breakeven rate, which shows what markets think inflation will average, is holding around 2.5%, up from about 2% in September. The signals have been there for a while.
But now that Big Tech is finally showing cracks, the market is reacting. These aren’t normal companies. They’ve been delivering monster growth for years. The Magnificent Seven has grown earnings per share by 37% a year since 2015. That’s five times faster than the rest of the S&P 500, which has averaged about 8% a year in that same period. That growth wasn’t hype. It wasn’t a bubble like the dot-com era. It was real profits, real earnings. But even that has limits.
And that’s the real risk. The S&P 500 has depended on these seven firms for nearly a decade. From June 2015 to February 2025, the Bloomberg Magnificent Seven Index returned 36% a year, not counting dividends. The long-term average return of the stock market going back to 1928? Just 6% a year.
Take the Magnificent Seven out of the equation, and the rest of the S&P 500 has returned only 5% a year since 2015. That’s mediocre at best. So if these companies stop posting huge numbers, there’s not much left holding the market together.
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