Retail investors are facing a pivotal moment as President Donald Trump’s April 2 tariff announcement draws near. Over the past few months, tariff-related news has created turbulence in the stock market, yet many investors have seized the opportunity to buy the dip. Now, with the announcement imminent, their resolve is being put to the ultimate test.
“They’re on the verge of being either brilliantly right or disastrously wrong,” investor-research firm Vanda Research noted in a recent report.
According to Vanda Research data, retail investors have remained notably bullish, even as the S&P 500 has declined from its February 19 peak. In fact, investors have poured over $32.9 billion into U.S. stocks, placing this influx of capital in the 97th percentile for any 24-trading-day period since 2014.
But it’s not just stocks that investors are targeting. There has also been a significant uptick in options trading. Marco Iachini, senior vice president of research at Vanda, pointed out that many retail investors have shifted towards buying bullish call options, indicating a belief that prices will rebound soon.
“Monday’s surge in options activity raises a critical question: Are investors bracing for volatility ahead of the April 2 announcement, or are they doubling down on a market rebound?” Vanda’s report stated.
Interestingly, while options buying generally correlates with equity purchases, the divergence seen this week suggests that investors may be taking a more strategic approach. Options require less upfront capital than direct stock purchases, allowing traders to maintain market exposure while mitigating risk.
This tactical positioning is reminiscent of August 2024, when a sharp market downturn spurred similar activity in the options market. Investors appear to be employing the same strategy now, hedging against uncertainty while keeping the potential for upside gains.
