VOO: Retail Remains Resilient, But is 'Buy the Dip' Dead?
- ETF investors’ legendary resiliency is being tested by steady downturns and convulsions.
- The fear is that any gains will evaporate in a so-called "sucker's rally."
- Signs are popping up that equity investors are heading for the exits.
At my local Ace Hardware last Thursday, as markets melted down amid tariff chaos and fear, I overheard a few floor clerks talking about ETFs. One of them announced he was buying “VOO.”
My ears pricked up, since ETFs are undoubtedly discussed far less often than fertilizer and screws in the Post Ace on Route 22 in Somerville, NJ. I walked over and told him I had also bought the Vanguard S&P 500 ETF (VOO) just before pedaling to the store for spinach and zucchini seeds.
He said markets will gain back lost ground once the tariffs hysteria blows over—pretty much my thoughts.
The anecdote touches on the retail appeal of exchange-traded funds and what has become an almost legendary resiliency among ETF investors. "Buying the dip" and dollar-cost-averaging are simple, basic concepts that have helped folks like me (who slept through economics classes) build a nest egg, and they are fundamental to the industry’s success.
Still, while buying into the selloff has been a good strategy for long-term investors, this time feels different. The convulsions feel deep, and there is no end in sight for the current volatility. White House messaging is boosting confusion, including a new 90-day tariff pause for some countries.
Sucker's Rally?
VOO is down about 8% since the floor clerk and I made our purchases. The market has flirted with bear territory, and the fear is that any gains will evaporate in a so-called "sucker's rally." But are retail traders’ fingers getting burned enough that they are backing away from their laptops?
VOO’s net inflows are steady with $6.5 billion being added Monday and Tuesday this week, while its older and now slightly smaller cousin, the SPDR S&P 500 ETF Trust (SPY), pulled in $15.6 billion.
At the same time, signs that equity investors are heading for the exits are popping up.
Source: etf.com data
For example, the $45.6 billion SPDR Bloomberg 1-3 Month T-Bill ETF (BIL), less than a tenth the size of VOO, has had net inflows every day since April 2, pulling in $4.6 billion.
It's a sign that buying the dip may be off the table, for now, as a strategy.
