Retail investors are bailing on the stock market, leaving bearish pros to decide its fate

Published Thu, Mar 9 202312:07 PM EST

Retail investors are buying fewer stocks as the market stagnates under the weight of higher interest rates and stubborn inflation — a loss of a key group to keep positive momentum going. Retail net purchases into stocks fell under $1 billion per day in recent days, according to Vanda Research, which specializes in analyzing individual investor trends. This is down from a record level of retail buying which neared $2 billion per day earlier in February, Vanda data shows. "The key takeaway is that a significant pillar of support for this year's rally will likely remain subdued in the weeks ahead," wrote Vanda in Thursday report. "This will make broad equity indices more susceptible to the whims of institutional investors, which remain broadly more cautious on the near-term outlook." After a hot start to the year, the S & P 500 has struggled since early February, as interest rates surged with the Federal Reserve promising more rate hikes ahead to slow the economy. Higher rates also boost interest in bonds over equities. The benchmark is still holding onto a 4% gain for the year, following a brutal 19% drawdown last year. .SPX YTD mountain S & P 500 so far this year So it will be up to Wall Street pros to boost markets, but they are generally bearish these days. Greenlight Capital's David Einhorn told CNBC earlier this month that investors should be bearish on stocks because of rising inflation. Wall Street's investment bank strategists see the S & P 500 stagnating at current levels for rest of the year. Along with the macroeconomic woes, Vanda thinks the dented enthusiasm from the retail audience is in part because interest in Tesla shares is waning. Tesla hosted an investors day to start the month that largely disappointed investors because of a lack of details about its future plans, including a possible cheaper vehicle. "The stock could face further pressure if hedge funds pounce on negative price momentum (see last week's VT) and retail flows were to slide back to pre-2023 levels on profit-taking as interest wanes following investor day," stated the Vanda report. TSLA 1M mountain Tesla shares, 1 month Tesla shares are off 12% this month.