The S&P 500 nearly reached an all-time high in late December 2023, but retail investors were not buying.

Retail investors sold off more than $25.92 billion in stocks that month, up from the $23.63 billion sold off by the group in November 2023 and the fastest pace of selling in years, according to data from S&P Global Market Intelligence.

"For retail investors, this was easily the most bearish month for the group since we've been tracking flows," said Christopher Blake, executive director for S&P Global Issuer Solutions. "The group turned to net selling a few months back and that momentum has continued to intensify as the market has rallied."

Retail investors sold off a net $84.2 billion in 2023. Many of the newer retail investors in the stock market appear to have taken profits and seem unwilling to put that money back into the market, Blake said.

Institutions were the largest sellers of equities in 2023, with nearly $221 billion in net outflows throughout the year and the S&P 500 gaining 24% on the year. However, institutions were buyers in December, with $6.3 billion of net inflows, compared to about $17.2 billion in net outflows for November and an average of $18.4 billion of monthly outflows last year.

Institutions had not been net buyers for an entire month over the past two years.

Institutions increased buying of consumer staples, utilities, consumer discretionary and energy stocks in the final month of 2023. The shift to buying in December by institutions could signal a shift in expectations for the group this year and was likely a key driver of the rally in late 2023, Blake said.

"Retail seems worried about the rally breaking and is looking to lock in gains, while institutions are seeing a potential shift in market direction," Blake said.

Index and exchange-traded funds bought a net $44.9 billion of stocks in December 2023, more than double the group bought a month earlier and about 4x the group's level of buying throughout 2023.

"The influx into index/ETF accounts tells us that investors wanted to take part in the rally but were less confident in individual securities compared to broad sector and market movements," Blake said.

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.