US-Iran ceasefire difficult to restore market confidence? Retail investors accelerate their exit from the US stock rebound, and the scale of ETF sales hits a new high for the year.

Notice that the surge in energy prices caused by the Iran war is leading to market volatility, eroding the confidence of some of the most reliable bulls in the market: retail investors. For example, on Wednesday, the S&P 500 index surged to its highest level since March as a result of the strong rebound triggered by the US-Iran ceasefire news and forced hedge funds to close out their short positions. Although institutional investors hurriedly covered their short positions, individual traders showed great reluctance to chase the rally. Instead, they used this rally as an opportunity to reduce their positions at higher levels. According to JPMorgan's data, on Wednesday, retail investors net sold ETFs at the fastest intraday pace in a year, indicating a significant deviation from their usual behavior. By the end of the day, retail investors' ETF holdings had dropped to the lowest level in 10 months, and they continued to withdraw funds from individual stocks. JPMorgan strategist Allen Jain wrote in a report, "The positioning of retail investors suggests that they are skeptical about whether this rebound can continue." Jain pointed out that this activity reinforces a broader shift that has been building up in recent weeks. Retail investors have shifted from actively "buying the dip" (a defining feature during last year's market turmoil caused by tariffs) to ignoring pullbacks, selling at higher levels, and taking more defensive positions. This pattern is consistent with the data tracked by Citadel Securities. Last week was the best-performing week for the S&P 500 index this year, but on their platform, individual traders were net sellers of US stocks and options. This has only happened 18 times since January 2020, which is very rare. Citadel Securities suggested that this could be a sign that a short-term rebound is in the making. JPMorgan's data shows that retail investors netted $4.8 billion in the week from April 2nd to April 8th, lower than the weekly average of $6.8 billion over the past 12 months. This slowdown is mainly driven by continued selling of individual stocks and flat demand for ETFs, indicating a broader shrinkage of risk appetite. According to Citadel Securities' Scott Rubner, recent trends point to early signs of profit-taking in the spot stock and options markets. Brett Kenwell, an investment analyst at eToro US Securities, said, "If we compare this year's pullback to last year's tariff sell-off, there was more panic in the previous drop - the so-called 'blood in the streets' catalyst that would trigger a rush in investors. This time, we haven't seen the same price action, which may make this pullback less attractive to some investors." He stated that as earnings season approaches and with the volatility caused by international events, some investors may be waiting for more clarity before taking action. According to JPMorgan's analysis, beneath the surface, positioning trends reveal increasing concerns about sensitive sectors of the economy such as industrials, financials, and energy sectors boosted by the surge in oil prices. At the same time, enthusiasm for large tech companies remains strong. JPMorgan stated that the so-called "Tech Fab 5," including Tesla, Nvidia, Microsoft, Meta Platforms, and Apple, continue to attract relatively strong interest from retail investors.