In April 2025, the US stock market experienced a technical rebound: Retail investors drove the S&P 500 up by 14%, and corporate buyback plans attracted market attention.

Since April 2025, the U.S. stock market has rebounded, with the S&P 500 index rising 14% in April alone and the Nasdaq index rebounding 15%. This surge was led by retail investors collectively buying technology stocks and options, leading to a short squeeze. U.S. companies announced buyback plans totaling $233.8 billion, the second highest level since 1984, bringing the total buybacks for the year to $665.1 billion. Structural changes in the market and Federal Reserve policies have become key focal points, with growth stocks and defensive stocks showing divergent performances, reflecting the contradictions and uncertainties in investor sentiment.

Retail Investors Net Buy for 21 Consecutive Weeks, Institutions Forced to Replenish

According to Bank of America data, as of May 2, 2025, retail investors have net bought U.S. stocks for 21 consecutive weeks, marking the longest streak since 2008. During the significant sell-off by institutions in March, retail investors bought up to $2 billion in a single week, and in April, they increased their positions in leading tech stocks like Nvidia and Amazon after the S&P 500 hit bottom. Jay Rice, a 64-year-old trader from Arizona, stated that he continues to increase his holdings in tech stocks using large block trades, viewing each market dip as a buying opportunity.

Meanwhile, institutional investors are showing a comprehensive retreat. In April, institutions net sold $2.7 billion, the second-highest on record, with hedge funds recording $1.5 billion in short covering. Commodity Trading Advisor funds (CTAs) tracked by Goldman Sachs, although still at low positions, have begun to slightly increase their stock holdings. Cohalo Asset Management noted that this rebound defied institutional expectations, and extreme position reductions have forced institutions to passively replenish.

Corporate Buybacks Hit Record High, Creating a "Two-Pronged Attack" with Retail Investors

Corporate buybacks have become another force supporting the market. In April, U.S. companies announced $233.8 billion in buyback plans, the second-highest since 1984, with the cumulative buyback amount for the year has reached $665.1 billion, surpassing the total for 2022. Tech giants like Apple and Microsoft spent a combined $90 billion on buybacks, creating a "two-pronged attack" scenario with retail investors snapping up call options.

Despite institutions continuing to reduce their positions in the spot market, the options market shows signs of chasing the rally. Last week, the scale of call options bought by institutional investors reached a new high since October 2024, but Goldman Sachs pointed out that institutional overall stock positions are still 15% below the historical average. Ken Mahoney, CEO of Mahoney Asset Management, admitted, "We originally held 40% cash as a defense, but now we're forced to use this ammunition to chase the rally."

Technical Indicators and Volatility Index Show Market Anomalies

The Chicago Board Options Exchange Volatility Index (VIX) has recently plummeted, with the S&P 500's one-month realized volatility dropping 17 points in a week to 19.8, the lowest level since November 2023. JPMorgan quantitative analyst Bram Kaplan noted that when the VIX falls below 20, Commodity Trading Advisor funds (CTAs) will be forced to adjust their strategies. The S&P 500 is currently only 2.5% away from the CTAs' collective buy trigger point of 5800, and a breakthrough could trigger an algorithmic trading stampede effect.

Growth Stocks Lead the Rally, Defensive Stocks Show Market Caution

In terms of sector performance, information technology and industrial sectors performed strongly. Growth stocks like Microsoft (+3.13%) and Tesla (+6.32%) led the rally last week, reflecting the market's continued focus on AI and tech innovation. However, defensive sectors like utilities (+1.40%) and consumer staples remain relatively strong, indicating that investors are still cautious about the economic outlook.

According to "Joe's Wall Street Pulse," although the information technology sector rose by 2.16%, the market has not yet shown a clear style shift, and a true change in risk appetite requires observing whether funds broadly flow into cyclical sectors.

Fed Policy Becomes a Key Market Variable

The market is currently at the crossroads of a technical rebound and policy uncertainty. The Federal Open Market Committee (FOMC) is about to hold a meeting, and the market is waiting for the Fed's latest interpretation of inflation and tariff policies. According to reports, Fed Chair Jerome Powell recently emphasized a "wait-and-see" stance and pointed out that tariff policies have changed the economic outlook, suggesting that policy adjustments will depend on data.

The bond market also reflects policy sensitivity. The two-year U.S. Treasury yield rebounded 33 basis points from this month's low of 3.55%, indicating the market's high attention to the Fed's future moves. Investors are also closely watching the upcoming CPI and retail sales data to determine whether the current rebound has sustainable momentum.

Structural Market Changes Spark Debate

This retail-led rebound has sparked widespread discussion about structural changes in the market. CNBC host Jim Cramer noted, "This is the first time since 1999 that we've seen retail investors using options strategies to counter institutional algorithms." Active users on platforms like Reddit and Robinhood are reshaping market dynamics and capital flows.

Peter Oppenheimer, Global Equity Strategist at Goldman Sachs, warned that if the U.S. economy falls into recession and leads to a 10% downward revision in corporate earnings, the S&P 500 could fall back to 4600 points, about 20% below the current level. Conversely, BlackRock Investment Institute believes that corporate buybacks and the AI technology revolution will support valuations, viewing the current rise as a potential buying opportunity.

References

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