Investors buy the dip in US stocks as Omicron drives market volatility

Traders have taken advantage of stock market dips in the past week to scoop up US shares, even as questions persist about the new Omicron coronavirus variant and the future direction of monetary policy.

Investors poured $10bn into equity funds holding US stocks in the week to Wednesday, building on a 10-week inflow streak, according to data provider EPFR.

Retail investors were particularly active in buying up US shares on the days when markets wobbled, a separate report collated by VandaTrack shows.

Global stocks were hit by their hardest falls in more than a year on November 26, with the S&P 500 falling more than 2 per cent, on concerns about the Omicron coronavirus variant. Yet retail traders bought more than $2bn of US equities that day, VandaTrack data show. A similar situation played out this week, when retail traders hoovered up $2.2bn in US stocks during a slide triggered by hawkish comments from Federal Reserve chief Jay Powell.

Stocks including Apple, Advanced Micro Devices and Microsoft all benefited from the shifts by retail traders.

Such buying activity echoed the trading patterns that followed the emergence of the Delta variant earlier this year, when stocks around the world fell in response to worries about rising infections.

The recent bursts of share purchasing among retail investors suggest that buying the dip — investing in stocks that have recently fallen in value — remains a popular strategy among amateur traders.

US retail investors pile in to Omicron-triggered sell-off

Nicholas Colas, co-founder of research house DataTrek, said retail investors had become “an important part of the US equity market ecosystem”. These investors’ prominence has grown during the pandemic as more have-a-go traders have taken to apps such as Robinhood to bet on stock prices.

Still, VandaTrack’s data showed that total retail volumes were “materially lower” than in the early stages of the pandemic — largely due to a decline in the number of day-traders using retail brokerages since the beginning of the year. “Those that remain are staunch bulls”, VandaTrack said.

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