After President Trump unleashed mayhem in financial markets in early April with proposals for steep tariffs on America’s trading partners, Breck Echelberger, a student at Texas A&M, sat up late one night flipping through Reddit.
“America is over,” one post read.
For Mr. Echelberger, 21, this was the moment he had been waiting for. It was time for him to load up on marquee stocks more cheaply.
On April 4, with the stock charts lit up in red, he bought hundreds of shares of companies like Nike, Apple, Costco and a few others that had been on his wish list for months. Mr. Echelberger said it felt “like Christmas.”
By the middle of the following week, the Trump administration had stepped back from its tariff plans, leading to a sharp rise in the stock market. Since hitting its low on April 8, the S&P 500 has climbed more than 25 percent, and it hit a record high late last month.
Mr. Echelberger, who said his investments had doubled in value since April, had followed a simple strategy that has become a mantra among retail investors — “buy the dip.”
“I knew that the market would recover at some point,” he said.
His conviction — and those of other “buy the dip” adherents — isn’t rooted in deep, technical economic analysis. In fact, it contrasts with the consumer sentiment surveys that have painted a public that feels gloomy about the economy. Instead, it is based more on an expectation that the market will rise again, simply because it always has before.
Similar to the investor credo of buying low and selling high, “Buy the Dip” has become a rallying cry on Reddit and social media.
And in this year’s market turmoil, individual investors like Mr. Echelberger were the ones who were buying the dip, analysts said, while many big, sophisticated Wall Street institutions missed out.
For the week through April 9, when the market was in a free fall, investors added more than $30 billion to mutual funds and exchange traded funds, according to data from EPFR Global. Both are seen as an indicator of retail flows.
At the same time, Bank of America’s global fund manager survey for the week through April 10 reported the largest two-month drop in professional asset managers’ allocations to the U.S. stock market as they shifted into holding cash.
Mark Hackett, chief market strategist at Nationwide, notes that a host of other gauges of investor positioning also suggest households continued to pour money into the stock market, while larger, so-called institutional investors backed away.
In part this is because big mutual funds tend to gird themselves for the potential for their own investors to withdraw money as the stock market drops — even though that doesn’t seem to have happened this time.
“It’s confusing the hell out of institutional investors,” Mr. Hackett said. “That is not how retail investors used to act. They used to be the first to panic.”
Portfolio managers responsible for investing a fund’s cash will also often say they do not try to time the market to make a quick profit, instead investing over a longer time horizon.
Don Townswick, an equity strategist at the fund manager Conning, said institutional investors had been “steamrolled” by retail in April. “We don’t tend to buy the dip,” he said. “We are not market timers.”
But for individual investors watching the market from home or on their phones, the theory is simple: Major U.S. stock indexes, currently led by the behemoth tech companies that dominate them, have tended to bounce back over time. Therefore, any drop, no matter how scary, is a chance to invest at a lower price and reap the reward as the market recovers.
While underpinned by a broad belief in the long-term growth of the United States, this is not a bet on the economy, or the direction of rates and inflation. It’s a learned response, Mr. Hackett said.
“It is this Pavlovian mind-set every time Nvidia drops a few bucks or every time Microsoft falls a few bucks,” he said.
This strategy has now become so reflexive that some investors and analysts say that just the perception that investors will pile in after a drop is leading more skeptical players to follow suit. That curtails sell-offs and gives the appearance of widespread bullishness, even when the reality is quite different.
Ben Bowler, an equity derivatives strategist at Bank of America, says that the emergence of the tactic goes back to Black Monday in 1987, the worst one-day drop in the U.S. stock market. Alan Greenspan, then chair of the Federal Reserve, responded to the drop by unleashing the might of the central bank, backstopping financial markets to assuage the panic that had taken hold. It worked, and stocks began to rise again.
In subsequent years, the Fed has intervened to stabilize markets multiple times, through the housing crisis in 2008, the pandemic in 2020 and even the fall of Silicon Valley Bank in March 2023. Those moves have become known as a put, or a form of protection that the Fed will step in.
“At some point investors learned from that repeated central bank put,” Mr. Bowler said. “If you know that eventually the central bank will step in, then you are incentivized to buy even before they step in.”
The rebound this spring, however, was driven by the Trump administration’s pullback on tariffs in the face of the turmoil, not the Fed opting to act.
It is not clear whether the fate of financial markets will continue to take priority over the president’s policy aims.
It’s also not a given that the Fed put will still be in play. If inflation resurges, that could limit the central bank’s ability to quickly take the brake off the economy and pivot to supporting markets.
The risk is that the next time stocks start to slide, the expected rebound fails to materialize.
“It’s like a rubber band. It goes out and comes in. But eventually, it snaps,” said Scott Sheridan, chief executive of tastytrade, a retail trading platform.
Mr. Bowler has tracked the growth of the buy-the-dip mentality by examining the average return of the S&P 500 on the day after the index has experienced a drop. Since the 1987 Black Monday decline, there has been an increasingly frequent and sizable stock price bounce the day after a fall. This trend is particularly noticeable through 2020 and during the first half of this year.
“The data supports the fact that we are in a structural buy-the-dip era today, more so than for the last 100 years of U.S. equity market history,” Mr. Bowler said.
Some retail investors began buying the dip during the pandemic rise of meme stocks and amateur investing.
Levi Montgomery first learned about the idea on Reddit as a high school senior, stuck at home during the early days of the pandemic. With time on his hands and a stock market in free fall, he turned to threads about investing on Reddit, determined to make the most of his tutoring paychecks. He typically traded every other day for about three or four hours.
Mr. Montgomery, now 23, doesn’t trade as frequently anymore, but when the market fell sharply in April, he couldn’t resist.
He returned to Reddit, encouraging others to seize the moment. Then he put his own advice to the test. He said he invested over the four days following Mr. Trump’s tariff announcement, as the market tumbled. Each day, he invested more despite stocks falling. As a result of the rebound, the nearly $19,000 he invested in April has gained 12 percent.
He hasn’t touched the money since. His plan? Let it grow, and in three years, he will buy his first home, although he is aware there are risks to that plan.
“Anytime that you make the decision to take some risks with your money, you’re thinking like, ‘Is this the right thing to do?” Mr. Montgomery said. “Those thoughts are always still there.”
With new tariff deadlines approaching in August, Mr. Echelberger, the Texas A&M student, said he’s hoping there is another big dip so he can buy more stocks in Nvidia, Apple and Robinhood.
“I’m just going to use this as a Black Friday discount day,” he said.
Joe Rennison writes about financial markets, a beat that ranges from chronicling the vagaries of the stock market to explaining the often-inscrutable trading decisions of Wall Street insiders.
Kailyn Rhone is a Times business reporter and the 2025 David Carr fellow.
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