Retail investors sold off US stocks in October at the fastest pace in years as the factors that drove a wave of them to equities in the early days of the pandemic have nearly all faded.

In October, retail investors sold off nearly $15.64 billion in stocks, the largest monthly outflow from retail since 2021, according to the latest S&P Global Market Intelligence data. Retail investors have sold off more than $55.31 billion in stocks over the past year, the data shows.

"We have seen retail selling accelerating in recent months as we believe macroeconomic factors have driven the group to normalize compared to pre-2021," said Christopher Blake, executive director for S&P Global Issuer Solutions.

Retail trading in focus

Retail investor involvement in stocks flourished under no-fee trading, stimulus payments during the early pandemic, and a "fear of missing out" as numerous meme stocks rallied and generated headlines during that time, Blake said. Retail outflows are likely to be pushed by the decline of nearly all the factors that brought these investors into the market in 2020.

Retail investors sold off nearly all sectors in October, boosting their selling of materials stocks more than any other sector. Retail investors did increase their buying of real estate stocks, which have been battered by the rise in interest rates and remote work.

Institutional investors

As retail investors sold off stocks, institutions continued outflows, selling off more than $18.66 billion in October.

While institutions have sold off nearly $251.90 billion in stocks over the past year, the selling has slowed. The selling in October was below the $27.85 billion sold in September and the 12-month average of $20.99 billion in selling.

Hedge funds

Hedge funds, however, continued to buy as other investors sold. Hedge funds bought $5.56 billion in October, up from the 12-month average of $2.88 billion in monthly inflows.

"The group has been the more likely of the groups to buy into weakness recently and this largely played out in October," said Blake.

Hedge funds bought nearly all sectors in October, including utilities, reversing large selling of the sector in September.