For years, "buying the dip" was a strategy famously championed by retail investors and often dismissed by professionals. But 2025 has marked a significant behavioral shift: institutional "smart money" is now embracing the dip-buying mentality at a rate not seen in years, effectively adopting the playbook that Main Street has perfected. This convergence of behavior helps explain the market's powerful and persistent resilience.
❍ The Institutional Pivot
The most significant change is the behavior of institutional investors. So far this year, they have been net buyers on 60% of days when the S&P 500 has declined by at least -1%. This is a major strategic shift. It marks the first time since 2019 that their dip-buying percentage has crossed the 50% threshold. This behavior is historically rare; institutions have only been net dip buyers in 5 out of the last 18 years.
❍ Main Street's Unfailing Conviction
Retail investors, in contrast, have been the market's most reliable and consistent buyers. They have bought the dip every single week this year that the S&P 500 has declined by over -1%. This unwavering conviction marks the sixth consecutive year that their dip-buying percentage has remained above the 50% mark, cementing their role as the market's most steadfast bulls.
❍ Hedge Funds Remain on the Sidelines
The one group not participating in this trend is hedge funds. They have remained net sellers on dips, and their dip-buying percentage has not exceeded the 50% mark since 2019. This positions them as the current outliers, lagging behind the bullish conviction of both retail and larger institutional players.
Some Random Thoughts 💭
This is a fascinating role reversal. We are now seeing "Wall Street" (institutions) adopt the very behavior that "Main Street" (retail) has been successfully using for years. This alignment between the two largest segments of the market is incredibly powerful. It explains why pullbacks have been so shallow and short-lived. With both institutions and retail investors now conditioned to view any -1% drop as an immediate buying opportunity, the market has a formidable floor of demand, frustrating skeptics and hedge funds who are waiting for a deeper correction.
