Schwab: Retail investors return to buyers after brief pullback
After retail investors became net-buyers in December for the first time since May, they returned to being buyers in January, according to the private clients tracked by the Schwab Trading Activity Index (STAX).
According to Schwab, the defensive positioning that investors took in the last month of the year, "quickly transitioned into enthusiastic dip buying" in January.
STAX gained 3.05% last month, which was the biggest percentage gain since October and significantly higher than the 0.13% gain for the S&P 500 during the January STAX period.
The STAX finished January at 49.96, the highest reading since February 2025. The STAX actually gained each week of the month - which is different from recent months when the STAX finished in positive territory because there was a surge in buying activity only during the final week of the month.
Most of the net-buying came in the information technology sector, according to Schwab.
The STAX has now outgained the S&P 500 in five of the last six months.
"The STAX was strongest toward the end of January after earnings season began," Joe Mazzola, head trading and derivatives strategist at Schwab, said in a statement. "We saw a good amount of dip-buying after earnings, most notably in Microsoft (MSFT)."
For the third straight month, members of Generation X, who were born between 1965 and 1980, were the most aggressive investors, while Generation Z, born between 1997 and 2012, were the least aggressive. The gap in activity between the generations widened from December.
"Generation X and Baby Boomers continue to buy the dips, but it's not the same with Generation Z," Mazzola said. "It could be that they're saving for new homes or worrying about the impact of AI on their jobs, but they're not as confident buying."
He added that millennials were "in the middle of the pack."
After information technology, the most popular sectors were financials, utilities, health care, and materials.
In terms of individual stocks, Microsoft "easily" had the most inflows as retail investors aggressively bought the dip in its shares. Next were Netflix (NFLX), Tesla (TSLA), Amazon (AMZN), and Nvidia (NVDA).
Microsoft suffered its worst trading days in years in January, dropping 9% after its earnings, as investors raised red flags about the amount of money being spent on AI. This concern also drove Amazon's stock lower as well.
"Buying in Microsoft could reflect anticipation that shares can hold the gap formed following last May’s earnings report when shares popped above $420," Mazzola said. "If the $420 level doesn't hold, a move back to $390 could be in play."
The top net-sells were Advanced Micro Devices (AMD), Costco (COST), Boeing (BA), CoreWeave (CRWV), and Alibaba (BABA).
CoreWeave rallied to a two-month high in January after having gotten beaten up at the end of last year over concerns about its substantial debt load. Schwab notes that investors began to trim shares in the stock after it rose from $70 to $114, as active traders in January were "seeking good entry points and exiting shares after riding the stock up if it couldn't break through a certain trading band."