<![CDATA[Sadi Capital]]>https://sadicapital.comhttps://sadicapital.com/img/substack.pngSadi Capitalhttps://sadicapital.comSubstackSun, 26 Apr 2026 00:10:34 GMT<![CDATA[Will the cycle really repeat?]]>https://sadicapital.com/p/will-the-cycle-really-repeathttps://sadicapital.com/p/will-the-cycle-really-repeatSat, 25 Apr 2026 20:47:21 GMTMany people with better degrees, better track records, and deeper pockets have written at length about market cycles. Howard Marks in particular has a brilliant book and a steady stream of memos dedicated to studying them. I am not here to disprove the observable truth that markets go up, then down, then up again.

What keeps me up at night is that in the age of information, the players within the cycle have changed, and that changes how the cycle behaves.

Before 2020, retail order flow rarely exceeded 10% of daily U.S. equity volume. By April 2025, J.P. Morgan clocked retail at 36% of total order flow, an all time high. Across 2025, retail accounted for roughly 20% to 25% of average daily trading, with $1.3 billion of net inflows hitting U.S. stocks every single day in the first half of the year, a 32.6% jump over 2024. By year end, retail had poured a record $5.4 trillion of trading activity through the market, and net retail inflows hit roughly $302 billion, beating the 2021 meme stock peak.

Due to the access of information retail now has, namely, that the market is a cycle, and buying low is typically a profitable strategy (amongst the prolific use of AI for market research and incredible data providers like unusual whales), it becomes increasingly difficult to assume that the cycle we have come to know and love will hold consistent.

A quick refresher of what retail has been doing:

On April 3, the day after Trump’s “Liberation Day” tariffs sent the S&P 500 down nearly 5%, retail investors net bought more than $3 billion of U.S. stocks, the largest single day haul on record going back to 2014. The next day they net bought $4.7 billion, another record. Meanwhile, institutional investors sold $19.5 billion of equities between April 2 and April 10. Retail bought what institutions were dumping, and when tariffs paused on April 9, retail rode the move up.

In 2025, the trade worked. Bespoke called it the second best year for dip buying since the early 1990s. Retail outperformed both SPY and QQQ on its individual stock books, per JPMorgan.

According to S&P Global, retail did not buy the dip cleanly. They sold $7.56 billion of equities into the worst part of the drawdown, then flipped back to net buying once the market had already rebounded 11.8%. S&P Global’s own analyst described the early April retail behavior as “panic sell,” followed by FOMO buying after the bounce. From April 2024 through April 2025, retail was actually a net seller of about $168 billion in stocks while the S&P rose 10.6%. The dip buying narrative is real at certain moments, but it sits on top of a messier reality where retail still sells lows and chases highs in aggregate.

So the process in my head looks like this:

Markets fall, retail buys the first leg confidently. Bad news compounds, the drawdown deepens, retail capitulates. Worse news comes out, retail flips bearish, sometimes shorts. Good news arrives, retail is offside. Institutions, who had been selling into the early dip buying, now have inventory to redistribute on the way up. Retail reverses again, chases, gets in late. The cycle continues, but now retail large enough now to provide the liquidity institutions need to reposition.

On caveats, we do not know in real time whether we are buying a dip or catching a falling knife. Korean retail bought Lehman in August 2008. They bought SVB in March 2023. That was not the best investment for them (hit zero). Buying the 1929 crash, or Buffett’s October 2008 op-ed call, was bleeding before it the “obvious” play.

The main point is this:

Through the democratization and commodification of information, is it safe for us to assume that the cycle will keep behaving the same way? If retail keeps buying dips, injecting liquidity into the market, how is this going to play out? How long before the next serious downturn, the one that does not get a 15 day pause from a Truth Social post? It probably makes the next capitulation way more painful, because the floor of “smart money buying fear” gets a lot thinner when most of the buying on the way down is coming from people who have only ever seen the recovery. As more retail traders learn the same lesson from the same chart, it would be foolish to assume the edge is the same.

Sources:

AI was used as a spell checker, researcher, and image generator.

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