By Barbara Kollmeyer
Retail buyers are ‘completely confusing’ institutional players, says Mark Hackett
The battle between retail and institutional investors took a step further on Monday. Strategist Mark Hackett says don’t bet against them.
Judging by U.S. stock futures action, investors look ready to buy Tuesday’s dip in the stock market triggered by weak service-sector numbers and signs of price pressures.
Our call of the day from Nationwide Investment Management Group’s chief market strategist, Mark Hackett, discusses the fierce battle that’s been ongoing between institutional and retail investors. He says for now, Wall Street shouldn’t bet against that cohort.
Friday’s selloff marked a “typical response” for the institutional investors, Hackett told MarketWatch in an interview. “Bad jobs data on top of the tariff launch and then you had the Russia submarine issue. There’s a whole lot of things together that caused the pullback in the market and then you saw Monday which was almost a complete reversal,” he said.
“To me, that is retail investors having been trained into this concept of buying a dip and it’s confusing institutional investors completely at this point,” he said.
“And then you go back to the April/May timeframe where institutions were completely on the sidelines, very conservatively positioned and the retail investors was aggressively buying dips. Now it’s worked so many times, at this point, the retail investor has fueled this sense of inevitability about recoveries, and that’s what i think you saw [Monday] continuing a little bit today [Tuesday],” said Hackett.
According to data from Interactive Brokers, some retail investors didn’t even wait for Monday to buy. The retail brokerage said its cumulative net stock buy orders rose 78% on Friday from a week ago. Friday also marked the S&P 500’s SPX fourth-straight losing session, the longest such streak since May 23.
“If you look back in history before the pandemic, Friday would have led to a more consistent downturn. You have the seasonal period of August and September weak, you’re sitting at 22 times earnings [for the S&P 500], the market had rallied almost 30% off the [April] low. That’s exactly the time you would expect this period of consolidation, downward sloping for a couple of months until you can maybe have a full-order rally,” he said.
“All historical trends are no longer working, and what it does is makes institutional investors very cautious about being short on an absolute relative basis, simply because of what’s happening with the retail investor,” said Hackett. That said, the nature of those investors has become predictable as they aggressively buy with each market pullback, he added.
Helping those investors out has been an enhanced toolkit with access to more options, lowered tech barriers and lots of free time during the pandemic that gave them a foothold in markets. “Retail investors have a sensitivity to momentum, a focus on thematics, and an insensitivity to high valuations,” LPL Financial head of equity research Thomas Shipp wrote in July.
In a reboot of 2021, investors have this summer also been flexing their muscles on individual names, such as OpenDoor (OPEN).
The bottom line from Hackett is that “you don’t bet against the retail investor right now.” That’s not to say that their power is unlimited and that buy-the-dip strategy might run out of steam, but now “the retail investor confusing the institutional investor out of doing what they want,” he said.
He said the last time retail investors ran into trouble was the spring of 2022 when Russia invaded Ukraine and markets endured a lengthy stretch of weakness, he noted. “But again, you got to October and then for no reason that felt real at the time, you saw this rebound and a very aggressive move from there,” he said.
Institutions coming into the final quarter of this year are struggling because major technology stocks are so heavily weighed already and they can’t have most of a diversified portfolio just sitting in seven major technology stocks. “Layer on top of that the fact that most of these people were very conservatively positioned back in April and now you’re chasing, you’re running from behind and it’s a terrifying place to be,” he said.
His expectation is that markets could consolidate through September, until tailwinds from U.S. government’s spending package and elsewhere start to kick in. That could then build up to a year-end rally, in his view.
Hackett says the retail cohort should take care right now, as markets bump up against high valuations, and economic uncertainty swirls. “Now wouldn’t be the time where I would be aggressively shifting my portfolio to risk on,” he said.
The markets
U.S. stock futures (YM00) (ES00) (NQ00) are higher, with Treasury yields BX:TMUBMUSD10Y BX:TMUBMUSD02Y edging up and gold prices (GC00) pointing south.
Key asset performance Last 5d 1m YTD 1y
S&P 500 6299.19 -1.12% 1.18% 7.10% 20.21%
Nasdaq Composite 20,916.55 -0.86% 2.44% 8.32% 27.80%
10-year Treasury 4.225 -15.40 -11.50 -35.10 27.10
Gold 3426.4 2.96% 3.13% 29.82% 41.41%
Oil 65.52 -6.80% -4.06% -8.84% -13.16%
Data: MarketWatch. Treasury yields change expressed in basis points
The buzz
Walt Disney (DIS) beat on earnings and missed on revenue as the NFL said it would take a 10% stake in Disney’s ESPN. Shares are down.
Airbnb (ABNB) and DoorDash (DASH) will report after the close.
Super Micro (SMCI) backed off a lofty forecast and the server maker’s stock is down 16%.
Disappointing Snap (SNAP) earnings are sending the Snapchat parent’s shares tumbling.
Shares of Advanced Micro Devices (AMD) are dropping even after the chipmaker’s upbeat revenue outlook.
Rivian Automotive shares (RIVN) getting hit after EV maker forecast a bigger loss for 2025.
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The chart
Richard Bernstein Advisors, in a post on X, shows how Tuesday’s Institute for Supply Management services survey stacks up looking back over the past 18 years: “Services #ISM now screaming LATE-CYCLE #STAGFLATION. Prices going up and New Orders going down. Not seen in 18 years since before the [global financial crisis].”
Top tickers
These were the top-searched stock-market tickers on MarketWatch as of 6 a.m.:
Ticker Security name
NVDA Nvidia
TSLA Tesla
AMD Advanced Micro Devices
PLTR Palantir Technologies
SMCI Super Micro Computer
GME GameStop
AMZN Amazon
AAPL Apple
TSM Taiwan Semiconductor Manufacturing
NIO NIO
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-Barbara Kollmeyer
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08-06-25 0717ET
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