Things might be different this time;
mitt senaste storverk
For now, the buy-the-dip crowd is right until proven wrong.
Extraordinary Popular Delusions and the Madness of Crowds
“buy the dip” strategies yielded worse risk-adjusted returns than passive stock holding.
Testing 196 “buy the dip” strategies on the S&P 500 since 1965 showed all had worse Sharpe ratios than simply holding stocks.
“Buy the dip” is characterized as value investing at a momentum horizon, betting against prevailing trends, unlike trend following.
5 December 2025
1929 The trend is your friend. And then the trend is not your friend.
What have I done? Caveat Emptor
No wonder it’s all ‘booms, bubbles and debasement’ after 312 rate cuts, there is so much monetary stimulus sloshing round global markets.
The easy money era ended only in part.
It had always rested on a growing web of government and central bank support including market rescues, corporate and bank bailouts, constant stimulus and, of course, record low rates.
Only very low rates have gone away. The rest of the culture continues to backstop the basic faith of market speculators that nothing will be allowed to go wrong.
The longer the bull run lasts, the more investors feel emboldened to buy any dip. The market suffered brief setbacks on news of a serious Chinese challenge to American AI dominance and of Trump’s tariffs.
Then retail investors rushed in to buy stocks like never before.
Ruchir Sharma Financial Times 10 February 2025
The thirst for risk in US stocks seems impossible to quench, despite trade conflicts, a weakening jobs picture, cracks in the credit market and a government shutdown.
The S&P 500 has defied virtually every warning in the past six months, clocking one of the best stretches since the 1950s.
And when the US stock market recovers from selloffs these days, there’s often an aggressive buyer lurking beneath the moves higher: short-sellers caught in a squeeze.
While that type of aggressive covering tends to push the broad market higher, the dynamic risks sending a false vote of confidence in stocks when the reality is nobody knows what will happen with President Donald Trump’s trade agenda, or with Fed policy.
“It’s not easy to short this market because it feels like this rally is never going to end,” said Thomas Thornton, founder of Hedge Fund Telemetry
Bull markets typically end when investors believe prices can only go up. It’s a bad sign that retail investors so eagerly bought last week’s stock-market dip.
Not every dip is a buying opportunity.
Dip buyers are being rewarded this week, as they frequently have over the past 15 years.
“Investors who are buying the dip are still driving the action, keeping sentiment firm even as technical indicators show signs of strain,” said Mark Hackett, chief market strategist at Nationwide.
Isabel Wang MarketWatch 15 October 2025
Dipbuyers now - Dipsellers later?
Everyday Americans and Wall Street pros alike have long been accustomed to a steady ascent in U.S. stocks. Wading in to buy declines always seemed to pay off, often almost immediately.
Moments of crises were met with a vigorous response from the U.S. government, ready to unleash stimulus and step in to calm markets.
By one measure, it has been the worst year for the “buy the dip” strategy in almost a century.
So why might the dynamics be different this time?
So far, many investors are still piling in. In the five days leading up to Wednesday’s massive rally, investors put an average of $10 billion a day into Vanguard’s S&P 500 fund, around four times the average rate.
The mentality is a marked change from the years after the financial crisis, when the S&P 500 fell by half from the summer of 2007 to its early 2009 bottom and scarred a generation of investors.
But the market started a long, slow rebound, boosted by a decade of ultralow interest rates. The S&P 500 gained 690% since it bottomed in March 2009 during the global financial crisis.
Wall Street Journal 10 April 2025
https://www.wsj.com/finance/stocks/market-rout-shatters-long-held-beliefs-on-investing-9474f59b
RE: Shit happens when the Dip-sellers arrive.
Börsåterhämtningen efter Donald Trumps tullsmocka i början på april har gått relativt snabbt.
Redan drygt en månad senare var det breda svenska indexet OMXSPI uppe i samma nivå som före tullbeskeden.
”Man blundar för det faktum att en stor del av industrin i Sverige kommer att ha ett sämre resultat 2025 jämfört med 2024. Samtidigt har vi förmodligen en av de största rapportriskperioderna någonsin,
med tanke på vad som sker med kronan gentemot dollarn och euron, och framför allt tullarna”, säger
Fredrik Warg global förvaltningschef på SEB.
DI 28 maj 2025
Regular investors have been ‘buying the dip’ aggressively.
This bodes ill for the stock market because widespread “buying the dip” behavior among retail investors is a hallmark of market tops
A bottom will be imminent when investors eagerly use the occasion of every rise in the market to reduce their stock exposure.
Such fearful investor behavior isn’t apparent nowadays.
It becomes even more remote with each successive dip in which investors are rewarded for buying.
Their successes lead them to become even more stubbornly committed to buying the dip.
Mark Hulbert MarketWatch 27 May 2025
Friday’s rout in the S&P 500 Index will test a months-long market trend: investors stepping in to buy the dip.
The bullish bias has persisted despite mounting risks.
The worry is that Donald Trump’s tariff threats against major US trading partners will reignite inflation and hurt earnings.
That prospect has yet to spark a prolonged slump, with the S&P 500 posting two record highs last week before Friday’s slide.
“Anytime the market shows any pronounced weakness, these pullbacks are getting bought,”
“I suspect that’s going to happen with this dip.”
Bloomberg 24 February 2025
https://www.bloomberg.com/news/articles/2025-02-24/s-p-500-rout-poses-fresh-test-for-wall-street-s-dip-buying-habit
The trend is your friend. And then the trend is not your friend.
https://englundmacro.blogspot.com/2024/07/1929-202-trend-is-your-friend-and-then.html
Why speculators are still running wild when money is no longer free
https://englundmacro.blogspot.com/2025/02/why-speculators-are-still-running-wild.html
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