By John Towfighi, CNN

New York (CNN) — A divergence is taking hold in markets: While Wall Street is sending money abroad, Main Street is leaning in to America, doubling down on a “buy-the-dip” strategy that has, for now, paid off.

Wall Street heavyweights continue to warn that the trade war could hurt the economy, posing a threat to markets. A Bank of America survey in April showed the largest number of global fund managers on record intending to decrease their holdings of US stocks. Seventy-three percent of respondents said they think US exceptionalism had peaked.

Yet retail investors, or individuals investing their own money, are giving stocks a big lift. They seemingly haven’t cared much about what Wall Street thinks, and have steadily scooped up US stocks this year, including taking the steep market downturn in early April as a chance to buy while stocks were relatively cheap.

As individuals bought the dip while fund managers showed caution, Main Street and Wall Street split in their views of America’s future — and its assets.

The divergence shows just how much uncertainty President Donald Trump has caused in his second term. Whether small-scale investors or deep-pocketed institutions come out on top is still in doubt as policy whiplash from the White House and a global trade war realign the world financial order.

Main Street dives in while Wall Street cautions against “complacency”

Retail investors on May 19 plowed $5.1 billion into US stocks, according to data from JPMorgan Chase. That’s the largest daily inflow into stocks from retail investors on record since data collection began in 2015. Those buys helped push the market higher that day, posting its only day in the green that week.

And retail traders bought a net $50 billion in stocks from April 8 to May 14, making them one of the top drivers of the market rally in late April, according to Emma Wu, a strategist at JPMorgan Chase.

“The buy-the-dip strategy in early April has clearly paid off,” Wu said in a May 15 note. Retail investors’ portfolios were up an estimated 15.1% in the month after April 8 as the market rebounded, Wu said.

In contrast, a Bank of America survey in May showed global fund managers reduced their allocation to US stocks to their lowest level in two years. Additionally, fund managers’ exposure to the dollar fell to a 19-year low.

Retail investors helped the US market recover in recent weeks by buying the dip. Yet the impact of Trump’s tariffs has yet to show up in hard economic data, suggesting there could be more cracks in the health of the economy later this year.

Jamie Dimon, chief executive at JPMorgan Chase, said on May 20 at the company’s investor day that markets are showing an “extraordinary amount of complacency” in the face of tariff risks.

“People feel pretty good because you haven’t seen an effect of tariffs,” Dimon said. “When I’ve seen all these things adding up that are on the fringes of extreme … I don’t think we can predict the outcome, and I think there is a chance of inflation going and stagflation a little bit higher than other people think.”

Seth Carpenter, chief global economist at Morgan Stanley, said in a Sunday note that he sees tariffs as an “outsized, fundamental shock” to the outlook for the US economy.

“Recent conversations suggest clients are feeling comforted that uncertainty is subsiding, but we hasten to add that tariffs remain and are likely to stay much higher than at the start of the year,” Carpenter said. “Announcements late last week of sharply higher tariffs on Europe show that the risks of elevated tariffs are far from gone. Most importantly, the slowdown from tariffs that have already been imposed has yet to manifest in the hard data.”

As uncertainty lingers about the US economy, retail investors could ask themselves whether they should keep dip-buying — and whether the best bets this year are even in US markets or elsewhere, like Europe.

Buying a dip or catching a falling knife

Steve Sosnick, chief strategist at Interactive Brokers, told CNN that diving in when stocks get relatively cheap has had a strong track record of success in recent years.

“Buying the dip as a strategy has worked exceedingly well for the better part of five years, and the more something works, the more people are inclined to keep doing it,” Sosnick said.

“How do you differentiate between buying a dip and catching a falling knife?” he said. “They’ll do it until it doesn’t work. And right now, it’s working for them.”

Dip-buying on Interactive Brokers, a trading platform widely used by retail investors, accelerated in April despite historic levels of volatility and uncertainty, Sosnick noted.

“A lot of our most active traders definitely embraced the volatility rather than fled from it,” he said. “Nobody wants to miss a rally.”

Sosnick said the top buys on Interactive Brokers have been AI and tech stocks like Nvidia (NVDA) and Tesla (TSLA), as well as exchange-traded funds that track the tech-heavy Nasdaq. When it comes to buying stocks during a downturn, people tend to stick with names they know.

America first or last?

US stocks this year significantly lag European stocks, and some Wall Street investors see better options abroad than in America.

“In many ways, the current muddle-through scenario — marked by wavering tariffs and shifting policy signals — might be the environment most likely to trigger a rotation in global equities,” Alastair Pinder, a strategist at HSBC, said May 20 in a note. “The US no longer looks as exceptional, while other economies across the world are ramping up stimulus.”

The S&P 500 is up slightly for the year after staging a recovery in recent weeks. Meanwhile, Europe’s benchmark STOXX 600 index is up 9.4%.

Germany this year passed historical fiscal reform to increase its defense spending, boosting stocks in Europe. And while US markets have recovered sharply since April, many analysts are not convinced America is out of the woods yet.

Ross Mayfield, an investment strategist at Baird, said whether the US markets or Europe outperform this year will largely depend on the direction of the dollar.

The US dollar index, which measures the dollar’s strength against six major foreign currencies, is down more than 8% this year. The euro in April hit its strongest level against the dollar in three years.

“International assets just have a tremendously easier time outperforming in a weaker dollar environment,” Mayfield said. “We’ve seen a bit of a bounce-back in the dollar, but there’s part of me that still thinks there could be more downside to the dollar from here, which would be a boon to international.”

Mayfield said the other key focus is whether investor excitement around AI continues to ramp back up or fades. If traders continue to rally around Big Tech companies that are “talking up their AI prospects,” it could be difficult for Europe or other international markets to outperform the US market, he said.

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