To buy the dip? Or not to buy the dip?
That is the question currently facing financial advisors.
Sorry for waxing Shakespearean over something so trivial as index shopping on market selloffs, but the future of so-called dip-buying does seem to be weighing on the minds of investors at the conclusion of this very volatile first quarter according to wealth managers. The S&P 500 is down about 6 percent from last month’s record high, begging the question as to whether investors have the bullish fortitude to return the index to its previous height and beyond.
Recent history, of course, has shown that buying the dip is a veritable no-brainer. Stocks have always bounced back from their losses ever since the denouement of the Great Financial Crisis in the spring of 2009.
Nevertheless, the spike in uncertainty since the start of the Trump administration in combination with other traditional bearish signs (AI bubbles, Middle East wars, a hawkish Fed, etc.) seems to have hit a nerve among investors causing them to wonder for the first time in a long time whether a generational shift in market sentiment from bull to bear is finally at hand.
INSTITUTIONAL SELLERS, RETAIL BUYERS
Despite all the uncertainty since the start of 2025, net inflows into US stocks and ETFs from retail investors have remained strong. This suggests that the dip-buying mentality remains robust among every-day investors. Retail investor fund flows are $67 billion so far in 2025, barely down from $71 billion in Q4 2024, according to VandaTrack and highlighted by the Financial Times.
Meanwhile, even as mom and pops have been buying stocks through each selloff this year, hedge funds, or the so-called “smart money,” have been selling into the storms.
According to a recent Goldman Sachs note, global hedge funds have accelerated the unwinding of their stock positions and they expect this trend to continue.
"Through yesterday, our best guess is that we are currently in the middle innings of this (de-risking) episode," said Goldman Sachs Vice President Vincent Lin in a note about hedge funds' flows.
ADVISORS DEBATE THE DIP
Matthew Liebman, founding partner & CEO of Amplius Wealth, said he is currently seeing a mix of responses from his advisory clients with some being eager to buy the dip while others are feeling more cautious. The majority, however, have not expressed a strong preference in either direction, according to Liebman.
“Our investment outlook is fairly neutral, so we’re neither aggressively buying nor selling. However, if a client is underweighted in areas of the market that have been selling off, we may adjust their allocation back in line with their target,” Liebman said.
Elsewhere, Greg Bronson, lead financial advisor for the West Coast with Aquinas Wealth Advisors, said he has indeed been witnessing the buy the dip mentality from clients, especially in light of the increased volatility thus far in early 2025. He added that retail investor flows remain surprisingly resilient, and it's clear that many are still willing to step in when markets show weakness.
That said, Bronson maintains that he is not currently in buy the dip mode across the board, primarily because the dip to date has not been deep enough.
“For us, a more compelling buying opportunity would come in the event of a more significant correction, typically in the 25 percent to 30 percent range or more. At that point, we would reassess valuations and market conditions to identify high-quality assets that may be trading at attractive discounts,” Bronson said.
The signal to shift away from a buy the dip approach, according to Bronson, would depend on broader macroeconomic deterioration, as in whether it's a sustained earnings recession, meaningful tightening in financial conditions, or systemic risk that changes the long-term growth outlook.
Aaron Brachman, wealth manager & managing director at Washington Wealth Group of Steward Partners, meanwhile, said he compares market fundamentals to the overall level of fear in the market when deciding when to buy the dip. One of the drivers he looks to for fundamentals is the cyclically adjusted PE (CAPE) ratio.
“Currently the CAPE ratio is around 36 which is near the upper band of its historical valuation, meaning the stock market broadly is at the expensive end of its range. When the CAPE ratio is this high, we often wait for higher levels of fear to enter the market before making major tactical shifts across portfolios,” Brachman said.
When it comes to the level of fear in the market, Brachman said the VIX, or so-called fear index, did not stay above his benchmark 25 level for a sustained period. As a result, he did not buy the dip and make major tactical changes to his portfolio.
“In those cases, capital preservation becomes the priority, and we’d move toward a more defensive positioning,” Bronson said.
John Lupi, managing director of investments at Client First Financial, part of Stifel Independent Advisors, said the recent selloff has provided him with a golden dip-buying opportunity, especially for the big-tech names that led the market higher.
“Many of the Nasdaq and growth leaders of 2024 have had significant retracements since year-end, and we are allocating fresh capital into these sectors and names at discounts to their 52-week highs,” Lupi said.
Moving on, Ryan Bond, wealth manager at Savvy, said he has “absolutely” seen clients express concerns over recent market weakness and then use those opportunities to buy the dip.
“Buying the dip if you have cash available is hard to time, but even if you get a small discount that can be considered a win. Most of our ‘buying the dip’ typically comes from our standard rebalancing process where we will shift from assets that have appreciated into underperforming assets at the time,” Bond said.
Added Bond: “With investing, there's never a time to stop buying the dip. There is never a perfect time to invest, so staying disciplined with your rebalancing and investment strategy and not making rash changes due to potential outcomes is always the most effective long-term strategy.”
Finally, Bradley Doy, co-founder and wealth advisor with VestGen, said he is deploying more money from cash and ultra defensive positions into broader equity portfolios at this time. While many of his clients are concerned with the recent volatility in both the stock and bond markets, Doy said the overwhelming majority agree with his decision to add to well-established US equities.
“We believe we are very near the bottom of this selloff, and we remind clients of the ‘rule of 10 best days’ and the risk of missing out on large upside returns as a result of being invested in cash,” Doy said.
As to when he will ultimately stop buying the dip, Doy said he is watching the PMI, changes to the tariff implementations and consumer confidence.
“If we see all three of these factors deteriorate, we will be become more defensive for our short-term investment portfolios,” Doy said.
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