LIVE MARKETS-Retail investors got it right, when will institutions come back?

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RETAIL INVESTORS GOT IT RIGHT, WHEN WILL INSTITUTIONS COME BACK?

It looks like retail investors are the winners from stock markets' tariff induced ructions, as they bought while institutions sold, with knock on effects for liquidity.

"Despite volatility spikes and headline risks, we’ve seen $50 billion in net inflows from retail participants over the past month. In contrast, institutional managers largely rushed to cash amid concerns about inflation and tariffs," said Jeff O’Connor, head of market structure – Americas at Liquidnet, in emailed comments.

"Retail has effectively stepped in as the ‘buy-the-dip’ cohort, and it’s been paying off.”

He added the reduced institutional participation has real consequences for liquidity.

"In early 2024, we were seeing one of the healthiest trading environments in a decade – tight spreads, deep books, and consistent block appetite. That dynamic has evaporated."

"Until we get a clearer macro picture, particularly around inflation and trade policy, I expect consistent institutional activity to remain subdued."

(Alun John)

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