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As hedge funds reduce their exposure to stocks amid intense volatility, retail traders have been buying the dip more aggressively than in any other correction since 2008, according to Bank of America.
Last week, while the S&P 500 was down almost 3%, BofA said in a Tuesday note that its clients were net buyers of US stocks, adding that they have been net buyers in seven of the last 10 weeks.
The bank said that retail investors have been a particularly aggressive group of buyers of the most recent dip.
"Retail clients have bought equities every week YTD and are more aggressive buyers of this dip than any other 10%+ correction post-crisis," said Bank of America.
The bank noted that its clients have been big buyers of consumer stocks, and have also increased their buying of energy stocks after being net sellers of the sector so far in 2022.
Last week, Bank of America said that the heightened retail investor activity was actually a good sign for the stock market even though others see it as a contrarian indicator of losses to come. The bank said that periods of high inflows from retail traders were often followed by a period of above average returns for the S&P 500.
In a separate note, analysts from the bank reported that money managers have increased their cash holdings amid growing concerns for global growth.
The current cash allocation of 5.9% is the highest since the start of the pandemic in 2020, and is a higher mark than the 5.4% logged in the 2008 financial crisis.
