"Sell in May and go away" — shorthand for the idea that US stocks rise more between November and April than over the summer— is one of the most oft-repeated adages on Wall Street.
But Main Street isn't listening.
New data from TD Ameritrade shows that retail investors shrugged off US debt ceiling uncertainty and recessionary fears last month as they increased their exposure to markets.
What's happening: May was a mixed month for US stocks. The debt ceiling debate and the possibility of a US default unnerved investors and ruffled markets.
Economic data beat expectations and inflation remained sticky, boosting fears that the Federal Reserve would raise interest rates once again. On top of that, regional banking worries were revived when First Republic Bank failed at the beginning of the month.
The Nasdaq Composite managed to gain 5.8% on the back of a boom in AI stocks and strong tech earnings but the S&P 500 was essentially flat and the Dow ended May 3.5% lower.
Still, retail investors increased their exposure to stocks last month and were the most bullish they've been in a year, according to the TD Ameritrade Investor Movement Index for May. That index aggregates Main Street investor positions and activity to measure how they're positioned in the market.
On the final day of May, retail investors alone had a net flow into equities of $1.48 billion, the highest in about three months, according to VandaTrack Research, a financial data company
Main Street takes a risk: Retail investors likely saw economic turmoil as an opportunity to buy market dips, Alex Coffey, senior trading strategist at TD Ameritrade, told CNN. "They were opportunistic about scooping up shares of regional banks," he said.
Retail investors also piled out of AI and tech stocks as the sectors surged in May, opting instead to put their money into riskier bets.
"The big takeaway to me was that while there was all this fear bubbling up, our clients saw this as an opportunity to rotate out of names that were doing really well and into names that had some bad news in May or that were struggling — companies like PayPal and Disney and even Tesla," said Coffey.
Retail investors are often seen as trend chasers, buying into stocks after they surge upward, but that's no longer the case, he said.
Empowered by platforms that allow them to trade quickly and cheaply, new access to market information and still armed with half a trillion dollars in pandemic-era savings, retail investors are making moves on their own instead of following the so-called smart money of institutional investors.
"These investors are a lot more contrarian than people think," Coffey added.
But these trades are risky and while an institutional investor might lose their job for making a big mistake, a Main Street trader could lose their shirt.
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