Retail investors made a profit by counter-trend bottom-fishing during the "roller coaster" of Trump's tariffs, while institutions missed the rebound

According to Zhitong Finance APP, on April 2, 2025, former U.S. President Donald Trump suddenly announced new tariffs, triggering severe fluctuations in the financial markets. In just two trading days, the total market value of U.S. stocks evaporated by about $6 trillion, and the S&P 500 index briefly approached bear market territory. In the face of this sell-off triggered by a sudden change in trade policy, Wall Street hedge funds and other professional institutions hurriedly withdrew, while retail investors, representing "dumb money," entered the market against the trend, ultimately achieving great success in this policy game.

Trump's tariff policy showed a dramatic turnaround: after announcing the tax increase on April 2, he announced a suspension of most of the tax plans just a week later on April 9. This reversal was directly reflected in the stock market performance—the S&P 500 index soared 18% after the policy suspension, and the Nasdaq 100 index strongly reversed from a technical bear market. Data shows that from April 8 (the day before the tariff suspension) to mid-May, retail investors net purchased $50 billion in U.S. stocks, with a cumulative return of 15%, outperforming most professional institutions.

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Michael Antonelli, a market strategist at Baird Private Wealth Management, pointed out: "Institutional investors created panic selling, but retail investors consistently increased their positions every two weeks, ultimately alleviating the selling pressure through sustained buying." Data from JP Morgan confirmed this trend: in the last week of April, the trading volume of individual investors surged to 36%, setting a historical peak since the institution began tracking, becoming the core force driving the stock market rebound.

Amid the market turmoil caused by the tariff policy, retail investors demonstrated remarkable composure. Data from Bank of America showed that as of May 15, individual investors among its clients had net purchased stocks for 22 consecutive weeks, setting the longest consecutive buying record since 2008. In stark contrast, the stock holdings of systematic funds were at the lowest 12% percentile since 2010, with Deutsche Bank models indicating that these funds were actually in a "cautious reduction" state.

"When professional investors are driven by fear, retail investors show a 'diamond hand' determination," analyzed Dave Mazza, CEO of Roundhill Investments. "They are not bound by performance benchmarks and do not face redemption pressure from clients; this 'burden-free buying' has become the key to victory."

Supporting the retail investors' counter-trend operations is their successful experience of "buying more as prices drop" during multiple crises. 33-year-old medical entrepreneur Meyer Davidov increased his positions in leading stocks like Blackstone (BX.US) and Nvidia (NVDA.US) during the tariff turmoil, stating, "Although this volatility is not easy to endure, my focus is on the long-term trajectory of the U.S. economy."

For hotel consultant and private chef Colin Sento, the signal to buy was when television networks and Wall Street investors warned that the market was about to crash. Subsequently, billionaire hedge fund manager Bill Ackman began criticizing Trump's tariff policy, convinced that it was the right time to buy more stocksSentor stated that his unwavering confidence in the stock market stems from his experience during the COVID-19 pandemic. At that time, the S&P 500 index hit a low on March 23, 2020, but rebounded by about 75% over the following year, marking one of the best 12-month performances in the index's history. Although Trump's indecisiveness on trade issues posed risks, other investors of his age also held firm confidence in the stock market.

This belief is particularly common among younger investors. Data shows that investors under 40 have experienced the bull market cycle from 2009 to 2020, and they have a higher tolerance for market volatility. However, this year remains challenging. According to JP Morgan, although retail investors performed well in April, as of May 15, this group saw a decline of about 2% in stock prices, while the S&P 500 index remained roughly flat.

Nevertheless, the strong market performance has also bolstered retail investors' confidence. The bear market following the COVID-19 crash five years ago lasted only 33 days, setting the record for the shortest bear market on record. The inflation panic in 2022 led to a 19% drop in the S&P 500 index within a year, but it subsequently achieved returns exceeding 20% for two consecutive years.

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The rise of retail investors is reshaping the ecology of the U.S. stock market. According to data, as of the end of July 2024, the S&P 500 index has gone 356 consecutive days without a 2% drop, the longest streak since 2007. JP Morgan predicts that retail trading volume will account for 19.5% in 2025, which, although lower than the 24% during the "retail trading frenzy" in 2021, still represents a significant increase compared to pre-pandemic levels.

"The market structure has changed dramatically," noted financial planner Douglas Boneparth. "While there are still speculators trading zero-day options, most retail investors are adopting dollar-cost averaging strategies. This 'middle path' explains why they can withstand panic while seizing opportunities from policy reversals."

With the White House recently signaling a relaxation in trade negotiations, the U.S. stock market has regained most of the ground lost during the tariff turmoil, with the S&P 500 index just 4% away from its all-time high. This market game triggered by policy shifts ultimately ended in victory for retail investors, serving as a wake-up call for institutional investors: in an era of rapid information dissemination and lowered trading barriers, traditional investment paradigms are facing unprecedented challenges