Institutional, retail investors shed $27B in US stocks in early April sell-off

Institutional and retail investors offloaded a combined net of $27 billion in US stocks in early April — much of which was bought by hedge funds, index funds and exchange-traded funds — as financial markets whipsawed after the US introduced a slate of new tariffs but subsequently delayed their enforcement for 90 days.

Institutional investors sold $19.52 billion in stocks from April 2, when the tariffs were announced, through April 10, the day after the White House issued an executive order pausing the implementation of the tariffs, according to S&P Global Market Intelligence data. This selling outpaced the $18.88 billion in full-month net capital outflows from institutional investors in March. However, this was still below the average $35.92 billion in monthly equity offloading recorded over the last 12 months amid a prolonged selling trend.

Similarly, retail investors extended recent selling trends by adding another $7.56 billion in equity supply during the period, bringing the combined stock sell-off from retail and institutional investors to about $27 billion.

"Prior to the new administration taking office, institutions were shifting sector exposure to passive investment vehicles," said Thomas McNamara, a director for issuer solutions at Market Intelligence. "The group likely wanted to maintain market exposure while eradicating stock-specific risk as the new administration implemented its policies. So, we can infer that the group was trading cautiously, but they likely did not anticipate the volatility we have seen so far in April."

Hedge funds added a net $8.05 billion in equities while index funds and exchange-traded funds (ETFs) bought a net $9.07 billion during the seven trading days between April 2 and April 10, combining for about $17.12 billion in stock holdings to absorb most of the institutional investor sell-off. Index fund and ETF activity during the period extended on trends seen over the last 12 months. However, hedge fund buying in early April and in March contrasted with a monthly average of $466 million sold over the last 12 months.

Trends amid policy changes

US President Donald Trump announced the reciprocal tariff plan near market close on April 2. The original intent was to enforce a universal 10% tariff on all countries beginning April 5 and higher, country-specific rates on select countries beginning April 9. The move triggered a global stock market sell-off. The White House later issued an executive order on April 9 that maintained the 10% duty but delayed the higher rates for 90 days. The S&P 500 rebounded 9.52% in response that day.

Institutional investor activity was consistent during April 2–10, with net capital outflows recorded in six of the seven trading days during the period. The group sold a net $1.06 billion on April 2, a net $14.76 billion from April 3 to 8 following the tariff announcement, and a net $3.70 billion from April 9 to 10 in the days after the tariff delay was confirmed.

Retail investors were net stock sellers during four of the seven trading days, but cumulative activity was similar to that of institutional investors. Retail traders shed $916 million on April 2, $5.64 billion from April 3 to 8 and $1.01 billion from April 9 to 10.

In contrast, index funds and ETFs were net buyers of equities during all three periods, adding $1.31 billion on April 2, $751.9 million from April 3 to 8 and $7 billion from April 9 to 10.

Hedge fund activity was mixed, with investors buying a net $1.43 billion on April 2 and $13.07 billion from April 3 to 8. Hedge funds reversed course on April 9 with significant selling, returning to a net buying position on April 10, but cumulative activity over these two days amounted to net capital outflows of $6.45 billion.

"[Hedge funds] were quick to capitalize on the downturn and the subsequent rally that ensued following the pause, and likely made a notable amount of money in doing so," McNamara said. "It would be short-term market dynamics that motivate hedge fund trading in this type of environment, and not necessarily any type of long-term play."

– Read the full special report from S&P Global Market Intelligence's Issuer Solutions team - Capital Flows AnalysisTariff Special Report: 2 April - 10 April 2025. – For more information on capital flows data from Issuer Solutions, contact Thomas McNamara at thomas.mcnamara@spglobal.com.

Trends by sector

The financials sector saw the biggest swings in investor positioning activity on April 2. Institutional investors dumped $1.17 billion in financial company stocks, but hedge funds gobbled up $1.27 billion in these holdings.

From April 3 to 8, institutional investors largely rotated out of cyclical sectors such as industrials, financials, IT and consumer discretionary, with reciprocal buying volumes by hedge funds.

Index fund and ETF investors were the most significant buyers from April 9 to 10. The data shows net capital inflows for this group in nine out of 11 sectors, with the largest buying volumes seen among IT and healthcare stocks.

For the full period from April 2 to 10, institutional investors were net sellers in eight sectors but pursued modest buying activity in noncyclical sectors. Retail investors were net sellers in every sector except IT.

"Institutional investors [exhibited a risk-off stance] by shifting capital from active long-only accounts to ETFs, favoring diversified exposure over individual stock risk," McNamara said. "Institutions primarily sold in higher-risk sectors ... while reallocating to safer sectors like real estate, materials and utilities. This behavior underscores a collective move toward capital preservation amid market uncertainties, such as tariffs and rising bond yields."

Hedge fund investors saw net capital inflows in eight sectors, with most allocations toward the cyclical financials and consumer discretionary sectors. Index fund and ETF investors similarly increased their net holdings in eight sectors, though net allocations differed slightly from those of hedge funds. However, the two groups were both net buyers within the communication services, consumer staples, financials, industrials, IT and materials sectors.