Retail investors are being lured back into the stock market, driven by the hype surrounding AI stocks such as Nvidia. In addition, the resolution of the US debt ceiling last week has further encouraged retail investors to get back into the mix. Average daily inflows into the stock market have reached $1.36bn over the past week, a three-month high, according to Vanda Research. Economic data is also helping to support the bullish outlook for stocks, with the May jobs report indicating that the US economy remains resilient despite increased interest rates.
Recent sentiment indicators have turned more bullish, with the CNN Fear and Greed Index and AAII’s weekly investor sentiment survey showing more positive readings. Popular trades for retail investors in recent weeks have included buying blue-chip stocks like Apple, as well as buying small-cap stocks and rotating out of regional bank stocks following a week-long rally.
Vanda Research predicts that the sustained interest in AI stocks could last for some time, but notes that retail investors have not yet reached the levels of buying activity that would cause concern. The return of the retail investor to the stock market should help drive stock prices higher, despite concerns of a looming recession and high valuations from some bearish investors.
