Retail investors exit, institutions take over! Amid the U.S. Treasury storm, "smart money" doesn't retreat but moves in: $18.4 billion in options funds flow into U.S. stocks, AI remains the top choice.

Latest data shows that institutional investors are taking over the driver's seat in the U.S. stock market. After years of strong buying, retail traders appear to be gradually stepping back to the sidelines. Meanwhile, data from Vanda Research shows that large investors have continued to hold stocks steadily in the face of surging U.S. Treasury yields. "Amid this week's intensifying macro volatility, institutional investors have shown unexpected resilience," Vanda global market strategist Viraj Patel wrote in a note to clients last Friday. Data shows that the scale of institutional investors' options fund inflows ($18.4 billion) was about three times the average for September in previous years. Patel said that even as 10-year and 30-year U.S. Treasury yields climbed to their highest levels in more than a decade, inflows from large investors continued to rise over the past five trading sessions. He believes that, beneath the broader risk-off narrative, this is a "fairly constructive signal" hidden within institutional investors' risk appetite. Patel noted that amid market turbulence, institutional traders are selectively positioning in artificial intelligence (AI)-related names. He specifically pointed out that Meta Platforms (META.US) was one of the top picks last week and is on track to post the third-largest weekly record in two years for institutional bullish option buying. Shares of the Facebook parent surged nearly 13% in the week after it launched the Muse Charm device. Since Meta released its Muse personal AI agent earlier this month, the stock's upward momentum has continued to build. Over a span of four trading days, institutional net bullish options exposure to Meta increased by $603 million. This aggressive positioning was second only to Micron Technology, Inc. (MU.US) across the market, while Meta's total bullish options turnover surged 243% from the previous week's level. "Macro uncertainty has not stopped risk-taking," Patel said. On the contrary, "it has made investors' stock-selection standards more selective." Retail trading share shrinks Retail traders delivered standout performance in 2025, leading many to declare that they had shed the "dumb money" label. Investors attributed part of that strong performance to decisions to buy the dip when market pullbacks were triggered by the Trump administration's tariff policies. But data from Goldman Sachs Group, Inc. shows that retail investors' share of total S&P 500 trading volume has continued to decline from a high nearly a year ago. The bank found that the current proportion is more than 3 percentage points below the five-year average.