Retail investors are running head first into this topsy-turvy market

While Wall Street spent the past week sweating over whether President Donald Trump’s now-altered tariff plan would push the economy into a recession or ignite a bear market, Rachel Hazit knew exactly what to do.

The Philadelphia-based marketer used cash she had on the sidelines to buy equities like the Vanguard S&P 500 ETF (VOO) and the Invesco Nasdaq 100 ETF (QQQM) last week. After learning about investing last year, the 32-year-old felt like she was seeing her first big drop in the market as someone with skin in the game.

“I see this time now as an opportunity,” Hazit said in an interview with CNBC this week. When the market declined last week, she remembers thinking: “This is on sale.”

Hazit’s investments are part of a flood of money totaling billions of dollars from everyday investors who have entered the stock market in recent days. These retail traders appear to following the conventional market wisdom of “buying the dip,” which refers to a strategy of purchasing stocks when they decline because they’re considered discounted.

Trump’s April 2 announcement of broad and steep tariffs sent the stock market reeling as investors feared the taxes on imports would hamstring consumer spending and drive up inflation. Several Wall Street strategists cut their outlooks for the S&P 500, a benchmark index of the largest public companies in the U.S., while multiple economists for these firms hiked the likelihood for a recession.

That all came to a head exactly one week later: Trump on Wednesday rolled back most of his planned levies, citing investor fears as one driver of the decision. An afternoon rally following the news pushed the S&P 500 up more than 9% in the session, marking its best day since 2008.

Institutional investors ran for the hills during that week, causing the S&P 500 to briefly dip into bear market territory, which refers to a 20% drop from recent highs. But data from market insights firm Vanda Research, a trusted authority on retail investor trends, showed mom-and-pop traders like Hazit doing the exact opposite.

“What marks an equity drawdown? It’s usually retail capitulation as the final shoe to drop,” said Marco Iachini, vice president of research at Vanda. “We’re clearly not seeing that.”

Consider that on April 3, while the S&P 500 cratered nearly 5% in the wake of Trump’s initial announcement, self-directed retail investors pushed more than $3 billion into U.S. stocks on balance. That’s the largest daily net haul on record, per Vanda data going back to 2014.

Small investors continued to buy stocks on balance over the following three days as the market tanked. In total, retail traders sent around $8.8 billion in net inflows to the U.S. stock market between last Thursday and this Tuesday, per Vanda.

Those purchases took place during an especially rocky stretch for the market. In the period between the April 2 close and the end of trading on April 8, the Dow Jones Industrial Average lost more than 4,500 points and the S&P 500 tumbled 12%.

Similarly, JPMorgan found retail traders bought around $11 billion in equities over the past week ended Wednesday. That’s about 2.5 times higher than the average seen over the past year, the firm said.

Some trading during this period appeared tied to speculation on if Trump would roll back the levies he slapped on foreign countries, Vanda’s Iachini said. But Vanda has also seen strong inflows into exchange-traded funds tracking the broader market like Vanguard’s VOO and State Street’s SPY.

Purchasing these diversified indexes can signal individual investors are looking to buy into the market and hold onto their positions for a longer-term period, Iachini said. That’s a strategy retail trading experts favor over stock picking and day trading.

This drive into broad market funds reflects the sentiment among the retail crowd that “buying the dip” is a successful strategy, Iachini said. The logic, he said, goes something like this: If it’s mostly worked and produced great returns over the last 15 years, why stop now?

To be sure, these investors are raising their exposure to an increasingly risky market. The CBOE Volatility Index, Wall Street’s “fear gauge” known in short as the VIX, closed at levels this week not seen since early 2020. The Dow, a blue-chip index closely followed by everyday traders, saw its largest intraday point swing in its history on Monday.

Retail investors have stood firm despite the turbulence. Mark Malek, investing chief at Siebert Financial, said his firm’s team that handles retail traders saw strong demand to buy on Wednesday, even as Trump’s announcement of pared-back import taxes catapulted the market higher.

Malek said there’s been significant interest in megacap technology names. In this vein, JPMorgan said Nvidia received about 6 of every 7 retail dollars sent into individual stocks on balance between April 2 and April 9.

Investing-focused influencers have tried to spread the word about the buying opportunity and dissuade panic-selling during the recent market decline. Tori Dunlap, who runs a platform focused on teaching women and minorities how to build wealth through investing, reminded followers that “millionaires are made during market downturns.”

But there’s also some key reasons for retail to sit out at this moment. One retail investor told CNBC that while he would have liked to buy the dip, he needed to save his cash on hand to pay the IRS by the April 15 federal tax filing deadline.

While Hazit has been sending cash into the market when it slides, she isn’t happy with the overall economic outlook. For example, she’s concerned about how Trump’s tariff policy could affect her spending power when she wants to buy a new phone in the future.

“This isn’t something that I’m out here celebrating. I’m quietly just buying one stock at a time when I can,” she said. “It’s definitely not a good time. It’s scary.”

Even as consumer confidence declines and recession fears swirl, this cohort of market participants knows that recent days have provided a good time to deploy cash into stocks.

Namaan Mian moved up his timeline to make his annual investments, knowing the decline in recent days provided an entry point. He bought shares of the Vanguard S&P 500 ETF on Tuesday, which aligns with his strategy of focusing on broad market indexes.

The 33-year-old said he wasn’t thinking about the potential for an economic downturn or what would ultimately happen with Trump’s tariffs. Because Mian looks longer term and has been investing since his teen years, he’s learned to detach emotion and always plans to keep holdings for at least several years. With this mindset, he said it can even become “fun” to watch the market gyrate.

“If I was 65 years old, I’m giving you a different answer,” Mian, the operations chief at a consultant training firm, told CNBC. “But because I’m not, I’m kind of just along for the ride.”

— CNBC’s Sarah Min contributed to this report.