You can tell a lot about a tree by looking at the rings in his trunk.
Each line represents a year in the life of a tree. A big ring can mean that it has experienced a season of rapid growth. A thin, crooked can indicate drought or illness.
Sometimes a simple stock chart can be just as revealing.
For example, view the screenshot of this morning from QQQ – the ETF that the Nasdaq follows.
Source: Yahoo Finance
It tells us everything we need to know about the 2025 market so far.
We came in a high tone and kept the momentum past the inauguration. Then came the first scent of rates … followed by Trump’s “Liberation Day” at the beginning of April.
And then the market actually fell from a cliff.
Investors panicked. Some even feared that we started a new big depression.
I was not one of them.
After this big sale, I told my readers that this was one of the best buying opportunities we had since Covid.
Fast forward to today, and the Nasdaq is at a record high.
But what the market revealed to us last week can indicate that there is still a change.
According to Goldman Sachs, hedge funds have been loaded away at the fastest pace in more than a year of tech shares. And they rotate in defensive sectors such as consumers staples, health care and utilities.
In other words, they dump innovation for toothpaste and ibuprofen.
So why is the market still sharpening?
Let’s unpack what really happens …
Because it reveals a growing gap that forms the stage for what the next big step in technical shares could be.
Wall Street withdraws while
Main Street charges ahead
Hedge funds lowered long technical exposure with the fastest rate in 12 months. In the last 30 days they have shifted more than $ 45 billion in exposure to equities from US shares.
Much of it came from the same technical and AI names that the rally driven earlier this year.
A Goldman Sachs customer note seen by Reuters confirms that last week’s pullback is the steepest in a year. It includes chip makers, software companies and IT services in North America and Europe.
Exposure to technology and media shares has fallen to five years in -depth, with some funds that now have the sector short -term.
This reflects a larger trend that goes back to the beginning of 2025, when Goldman first warned of intense global sale of shares in different sectors due to rates.
Why the sudden pullback?
Because some big technical names act at 30%+ premiums to their average of 10 years.
And with rates on the table again – and the Fed still uncertain about lowering the rate – many fund managers are worried about the inflation that crawl back into the picture.
That means that high flyers such as Nvidia and Tesla are sold and shift to defensive stocks that can drive uncertainty.
The fact is that many of these funds chased the same basket with shares earlier this year. And when the market fell in February, they were caught on the wrong side of the trade.
Now they relax those positions and re -enlightening in staples such as food and personal care.
And for the time being it seems that institutional investors continue to play the defense.
But exactly the opposite happens with retail investors.
While hedge funds increase cash and cut risks, everyday investors pour money into technical shares and AI-theme ETFs at a record pace.
In fact, this is the widest divergence between institutional caution and conviction of the retail trade since the post-known rally.
JPMorgan estimates that individuals deposited $ 270 billion in US shares in US shares in the first half of 2025.
And they are expected to add another $ 360 billion at the end of the year.
That is more than $ 600 billion In “Grassroots” capital is expected to flow this year on the market, with most of IT aimed at technology and AI.
But unlike the intoxicating days after the framework of the days, these investors are no longer a one-time meme sharing traders.
The average retail investor today is 33 years old.
They use mobile platforms such as Robinhood and Webull.
And they are becoming more and more financially Savvy, even though they get information from Reddit-Threads or YouTube channels or even AI-driven sentiment trackers-to find their next exchange.
In short, they are informed and digitally native. But they are also susceptible to what researchers call “social contamination.”
In other words, when shares such as Nvidia or Palantir start with trending, a single Reddit-Thread or a Tiktok clip or even a quote from a speeching CEO can be anything needed to activate a wave of buying.
They are not so concerned with the foundations.
They are more concerned about Momentum. And they are not afraid to buy the dip.
And that’s something all Investors have to pay attention, because retail traders are now good for almost 21% of the daily US share volume.
That is a decade ago of only 10%.
But is it enough to maintain this rally?
Here is my opinion
I recently told Extreme fortunes Readers that this market feels like a ‘gravel higher’.
In other words, it is a low volatility strength where the momentum takes over and retail investors continue to withdraw.
Hedge funds are on the sidelines for the time being and see this rally unfolded without them.
But if retail investors continue to buy, as JPMorgan predicts, this can add another 5% to 10% for the S&P 500 in the coming months.
Until now, the income was considerable. The FED is in waiting mode and the AI implementation stimulates profit margins in various industries.
If this applies, there is your bull case for the rest of the year.
But we go in autumn, which is historically one of the weakest pieces for shares.
And if one of Trump’s rates begins to reach consumer prices, or if the FED situation becomes dicier than it already, we can see the current Bullish sentiment that Bearish is fast.
After all, the market cannot run at Momentum forever …
And that could be a major problem for the high -flying technical shares of today.
Greetings,
Ian King
Main strategist, Banyan Hill Publishing
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