Market’s Most Reliable Dip Buyers Cash in on Latest TACO Turn

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Market’s Most Reliable Dip Buyers Cash in on Latest TACO Turn.

stock :: 2026-01-23 :: source - bloomberg

By Natalia Kniazhevich

(Bloomberg) -- There were doubters, all across Wall Street by some accounts, that Tuesday’s stock rout would be short-lived, a pullback not sharp enough to dissuade President Donald Trump from waging a trade war with Europe for control of Greenland.

Not among them: the retail crowd.

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Individual investors plowed $4 billion into US equities as the S&P 500 suffered its biggest draw-down in three months, according to data from JPMorgan Chase & Co. Another $2.3 billion flowed in on Wednesday, just in time for Trump to unleash a rally by standing down from his tariff bluster. Stocks soared 1.2% and gained another 0.6% Thursday, essentially wiping out the first-day slide.

For retail traders, the dip buying was axiomatic. The strategy that was born in the 2020 Covid bear market and came of age during 2021’s meme stock frenzy has a new corollary in Trump’s second term. Encapsulated by what’s been dubbed Trump Always Chickens Out, the TACO trade holds, primarily, that any drop caused by threats of punitive levies is a golden buying opportunity. It worked in April. It worked all summer. And it worked this week.

“Retail appetite has been notably strong, with individual investors stepping into markets despite volatility driven by tariff headlines, geopolitical uncertainty and policy noise out of Davos,” said Lale Akoner, eToro global markets strategist. “The scale of inflows suggests retail investors remain broadly optimistic on risk assets.”

Read: How Trump’s Greenland Threat Revived the TACO Trade: QuickTake

Exchange-traded funds absorbed the bulk of the demand. In the five days through Jan. 14 and Jan. 21, broad-based equity ETFs, which account for roughly 40% of retail ETF purchases, posted their strongest inflows ever on a rolling weekly basis. The flows were driven by heavy buying of funds such as the Invesco QQQ Trust Series 1, SPDR S&P 500 ETF Trust and Vanguard S&P 500 ETF, JPMorgan’s data show.

“We all know Trump’s playbook now. He threatens something big, then walks back when he gets what he wants. The market overreacts, and this becomes a tremendous buying opportunity,” said Kevin Xu, a former retail trader who is now chief executive of Alpha, a chat app for retail traders.

The buying frenzy continues a yearlong run of positive reinforcement for the trade, starting in January 2025 when China’s DeepSeek artificial intelligence app sparked a brief rout in US tech giants. The granddaddy of dips came three months later when Trump’s initial tariff rollout caused a double-digit pummeling. He capitulated not even a week later, touching off the biggest one-day rally in four decades.

“This level is comparable to last year’s major buy-the-dip episodes,” wrote JPMorgan strategist Arun Jain. “Unlike those prior episodes, which faded quickly, the current New Year momentum has been sustained, pushing retail activity to an all-time high on a rolling monthly basis.”

Retail traders, who account for almost one-quarter of activity on US exchanges, left fingerprints elsewhere in recent market action. A cold snap across the US sent natural-gas futures soaring, leading retail investors to accelerate selling in the ProShares Ultra Bloomberg Natural Gas exchange-traded fund (BOIL) in a bout of profit taking.

Within single stocks, technology continued to dominate retail demand, followed by consumer discretionary and communication services. While the Magnificent Seven accounted for most retail single-name activity in 2025, investors have begun branching out. This week, Tesla Inc. and Amazon.com Inc. remained top retail picks, but were closely followed by Netflix Inc., Micron Technology Inc., Taiwan Semiconductor Manufacturing Co. and Intel Corp. Netflix reported earnings Tuesday. Many of the other tech names are up next week.

Retail traders also continue to toil in the derivatives markets, where they can leverage bets. Average daily share volumes and options contracts traded by individual investors are running more than 40% above the January average from 2020 to 2025, according to data compiled by Scott Rubner, Citadel Securities’ head of equity and equity derivatives strategy.

Overall, retail flows have skewed decisively toward buying for seven consecutive weeks — and in 37 of the past 38 weeks — reinforcing the view that individual investors remain a powerful, bullish force underpinning US equities, Rubner added.