Professional investors are taking profits as the US stock market extends its record-setting run, leaving retail traders to carry much of the momentum in the ongoing bull market.
But even the resilience of retail investors is slowing down, said Bank of America (BofA)
According to client-flow data from BofA, hedge funds and other institutional clients have sold more than $67 billion worth of equities in 2025, including both single stocks and exchange-traded funds.
This marks the heaviest round of institutional selling since the early months of the bull market three years ago.
BofA’s data suggests that while professional investors have become more cautious—citing concerns over valuations, interest rate trajectories, and geopolitical risks—retail investors have remained the market’s most consistent buyers, stepping in during pullbacks to sustain the rally.
Retail investors’ resilience, a behavior forged during the post-pandemic rebound, has paid off handsomely.
Their steady inflows during dips have positioned them ahead of many institutional investors who opted for caution amid uncertainty surrounding rate cuts and global conflicts, including those in Gaza, Ukraine, and Iran.
Retail traders show signs of fatigue
BofA noted that retail enthusiasm is beginning to wane, with early signs of fatigue after the market’s relentless upward momentum.
The first week of November recorded the largest net selling of technology shares by hedge funds in two years, signaling growing unease about high valuations in megacap tech stocks.
Despite retail investors’ steady buying earlier in the year, even they may be showing restraint as major indices flirt with record highs.
Meanwhile, professional investors continue to offload positions—particularly in the technology sector, which has driven much of the market’s gains since 2020.
Tech stocks face valuation pressures
According to BofA, hedge funds and large investors sold more than $5 billion worth of technology stocks in the first week of November, the biggest sector-level selloff since July 2023.
Technology shares were the most heavily sold in the S&P 500, reflecting growing concerns that valuations have reached unsustainable levels.
The broader market has responded in kind.
The S&P 500 fell more than 1% on November 4, even after Palantir Technologies posted stronger-than-expected quarterly results.
Analysts noted that Palantir’s lofty valuation—despite solid fundamentals—underscored the market’s current discomfort with high-priced tech names.
Deutsche Bank strategist Jim Reid described the recent downturn as a “risk-off move,” pointing to increasing speculation that the equity market could be nearing a correction.
He noted that while the “Magnificent 7” group of large-cap tech stocks continues to advance, the equal-weighted S&P 500 declined in October for the first time in six months, highlighting growing concentration risk in the market.
Even as Wall Street rebounded on November 5, valuation worries persisted, particularly after AMD’s latest quarterly results.
Even so, retail investors’ influence remains significant.
Their persistent engagement has helped stabilize markets through multiple pullbacks this year, particularly in megacap technology stocks and more speculative areas of the market.
As 2025 enters its final months, Wall Street faces a test of conviction: whether retail investors will continue to carry the rally forward—or whether institutional caution will signal an inflection point for the bull market’s next phase.
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