Whether former retail investors in US stocks rose to fame in the war by driving up Meme stocks on their own, or after the Federal Reserve announced its biggest rate hike in more than two decades in early May, the Nasdaq and the Dow posted their biggest declines since June 2020, retail buying has reached near record levels, and retail investors can always be seen in the darkest moments of US stocks.

The three major indexes of US stocks hit new highs in more than a week on Thursday, with the Dow rising for five consecutive weeks and is expected to rise throughout the week and end weeks of declines, while retail investors may be behind the scenes, and the power of retail investors is never to be underestimated.

Net inflows of retail investors are near record highs, with retail investors buying $76 billion worth of shares in the last three months, or an average of $1.3 billion a day, according to the latest data from Vanda Research, a research firm that tracks retail trading flows in the US. Meanwhile, retail investors' portfolios have shrunk by an average of 32%, the worst performance since Vanda tracking data in 2014.

Vanda Research researchers Marco Iachini and Giacomo Pierantoni said in a report:

Historical experience shows that when faced with large losses, retail investors are the first to bear losses, but the mood still seems to be flexible.

To be sure, risk aversion will eventually return, and the situation will be even worse if stocks experience a sharp and rapid decline from here.

Other sentiment indicators from social media seem to confirm that retail investors remain focused on buying the daily limit. As Vanda points out, the number of comments and topics related to "market bottom" in the WSB sub-section has increased to a high in January last year, indicating that speculative retail investors are once again seeing signs of a market bottom at current levels (that is, levels are well below the real market bottom of the cycle in March 2020).

In addition, Alphabet Inc-CL C trend data also confirmed that interest in the "bottom of the market" is still far from the level seen during the decline of the epidemic. Although the number of searches related to the topic is far from where it was in early 2020, these search terms ("bottom of the market") are three times more popular than during the sell-off in the fourth quarter of 2018.

The S & P 500 has been on the brink of a bear market over the past week, but retail investors have adopted a bargain-hunting strategy that has helped the index rebound quickly in a short period of time. Vanda said that in the absence of additional selling pressure from institutions, large inflows from retail investors could be the main driver of the sharp intraday rebound. According to Vanda, retail investors' favorites are technology and growth stocks, such as Apple Inc, Tesla, Inc. and Amazon.Com Inc.

So the next question comes naturally, how many retail investors can make a big rebound in U. S. stocks? According to Vanda, the net retail buying data showed a high correlation with the intraday price movements of the S & P 500, with a change in net retail purchases of $10 million that moved stocks by an average of about 20 basis points, at least over the past three trading days.