Retail investors cautiously re-engaged in July, Schwab data reveals

Retail investor activity nudged upward in July, marking a modest uptick in engagement, but remains firmly in the “low” range compared to historical norms, signaling cautious optimism amid a broad market rally.

The Schwab Trading Activity Index rose to 41.79 last month from 40.66 in June based on actual trading and positioning data from millions of its retail clients.

“What the July STAX shows us is that while Schwab’s retail clients are bullish, that optimism is measured,” explains Joe Mazzola, head trading and derivatives strategist at Schwab. “The S&P 500 may have hit new all-time highs in July, but we’re not seeing the kinds of risk-on strategies that would indicate a lot of confidence in the rally’s longevity.”

Volatility ebbed to five-month lows as geopolitical fears calmed and US budget negotiations ended with less drama than markets feared. The Cboe Volatility Index dipped below 15 - well under its long-term average of 20 -reflecting a cooling in fear levels across markets.

But even as the rally broadened with nearly 75% of S&P 500 stocks trading above their 50-day moving averages by late July, Schwab’s clients showed signs of hedging.

High-profile names like Apple, Ford, AMD, Boeing, and Nike were net sold during the period, while on the buy side, traders favored growth and AI-driven names such as NVIDIA, Tesla, Palantir, Amazon, and UnitedHealth Group.

Looking at what was happening in the US economy in the month preceding this investor activity, job growth came in at 147,000 in June, unemployment dipped to 4.1%, and retail sales rose 0.6% month-over-month.

Consumer sentiment also perked up with the University of Michigan’s preliminary July read hitting a five-month high at 61.8.

Inflation remained a concern though with headline CPI up 0.2% in June, while core CPI rose 0.3%, bringing annual inflation to 2.7%. Goods prices in particular suggested tariffs were likely starting to bite.

Earnings season provided a shot of adrenaline with roughly 83% of reporting companies beating Wall Street estimates and helping to power equity gains. The S&P 500 saw its fourth consecutive week without a 1% daily move, highlighting the market’s relative calm.

However, there was a brief media scare that President Trump might seek to fire Fed chair Jerome Powell which caused a spike in Treasury yields, sending the 10-year note to 4.5% before the story eased as the president said firing Powell was not necessary.