Retail investors jumped back into buying equities in January as the S&P 500 climbed to an all-time high after uncharacteristically selling stocks amid a rally at the end of 2023.

Retail investors bought a net $5.62 billion in stocks in January after selling off $25.92 billion throughout December 2023, according to the latest data from S&P Global Market Intelligence. Retail investors have sold off a net $82.96 billion in stocks over the past year and have sold off $43.94 billion since the S&P 500's most recent trough in late October 2023, the data shows. The large-cap stock index has rallied more than 20% since late October as retail investors sold.

Fears of missing out on the rally appeared to take over the group in 2024 as retail investors bought back into the market.

This article highlights capital flows data available from S&P Global Issuer Solutions. Data and insights for this article were compiled by Matthew Albert, Mark Buckles and Christopher Blake. For more information on this product, please contact Christopher Blake, executive director, at christopher.blake@spglobal.com.

"For retail investors, selling into the strength of this rally at the end of 2023 was out of character relative to the historical norms for the group," said Christopher Blake, executive director for S&P Global Issuer Solutions. "We typically would have expected to see the group chasing the rally for fear of missing out on gains."

Institutional flows

Institutions, which suddenly became buyers in the stock market at the end of 2023, returned to selling in January, selling a net $20.30 billion during the month. While institutions bought a net $6.30 billion of stocks in December 2023, the group has sold off a net $222.22 billion over the past year.

"The overall return to net outflows for [institutions] was more likely driven by macro headwinds for active long-only strategies as opposed to the group turning more negative on this rally as a whole," Blake said.

Institutions boosted their exposure the most to communication services stocks and sold off stocks in every other sector. This was likely due to momentum-focused trading strategies since this sector was among the best-performing sectors in January, Blake said.

Retail flows

Retail investors sold off communication stocks the most after buying heavily in December 2023. The group boosted exposure the most to energy stocks in January, the data shows.

Blake said January appeared to be "more a return to long-term norms" for institutions and retail investors, but if the rally continues, there could be more aberrational trading behavior as retail investors and institutions balance the fears of missing out on gains with concerns of a market pullback.

Hedge fund flows

Hedge funds, which bought a net $7.60 billion of stocks in January after selling $13.40 billion in December 2023, increased buying of consumer staples and consumer discretionary stocks in January while selling off communication services stocks.