Buy the dip forever: Retail traders plowed $1.9 billion into stocks during the Evergrande sell-off, in the 4th biggest net purchase of the pandemic

• Retail investors plowed $1.9 billion into US stocks during the Evergrande sell-off, data shows.
• That was the fourth-biggest day of net purchases since the start of the coronavirus pandemic, VandaTrack said.
• Stocks sold off sharply but rebounded later in the day, as both retail and institutional investors bought the dip.

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Retail traders' buy-the-dip impulse remained as strong as ever when the Evergrande crisis rocked markets on Monday, new data has shown.

Amateur investors plowed $1.93 billion into US stocks on Monday during the Evergrande sell-off, the fourth-largest net purchase since the COVID-19 crisis started, according to data analytics company VandaTrack.

As has been the case during other dip-buying episodes, purchases were concentrated in State Street's S&P 500 exchange-traded fund (the SPY) and Invesco's Nasdaq 100 ETF (the QQQ). VandaTrack said the two ETFs saw combined inflows of $337 million on Monday.

The stampede into stocks is the latest instance of retail traders' tendency to buy equities as they fall, in the belief that they'll keep on rising.

Institutions sold stocks as they fretted about the impact of the looming default of Evergrande, China's second-biggest property developer, which has ties to investors around the world and suppliers across its home country.

Read more: Meet the 8 strategists calling for a stock market correction by the end of the year as Wall Street turns bearish. Here are their key concerns and top recommendations for positioning against a market meltdown.

Yet the buy-the-dip mantra is almost as strong on Wall Street as it is for day traders buying stocks on their phones and laptops across the US.

The S&P 500 fell as much as 3% on Monday, but pared its losses to finish 1.7% lower, as a wave of buying picked up in the final moments of the trading session.

JPMorgan's market guru Marko Kolanovic is among those to have recommended investors use the Evergrande sell-off as a buying opportunity. Fundstrat's Tom Lee also told CNBC on Monday said the volatility could be a "really good buying opportunity."

VandaTrack's Connor Mayes said retail investors had, on net, bought US banks, suggesting that institutional investors were selling as the Evergrande crisis came into focus.

But he added: "Airlines were net sold by retail, which means institutional investors were on the other side of the trade, building exposure to the reopening."

US stocks have steadied since Monday's selling. The S&P 500 slipped 0.08% on Tuesday, but futures contracts for the index climbed on Wednesday, suggesting a stronger start to trading later in the day.