Iran war volatility is pushing retail investors to sell stocks, but they aren't leaving the market entirely

MW Iran war volatility is pushing retail investors to sell stocks, but they aren't leaving the market entirely

By Gordon Gottsegen

Retail investors were net sellers of single stocks for the first time since 2023

Retail investors are increasing exposure to assets beyond single stocks.

The Iran war and rising oil prices have caused the stock market to churn.

The S&P 500 SPX is currently down about 6% from its record high in January, and the Cboe Volatility Index VIX remains elevated compared to its historical average.

This volatility is starting to get to retail investors. Data from Vanda Research show that retail investors were net sellers of single stocks on March 23, dumping $20.6 million worth of stocks. It was the first day retail investors sold more stocks than they bought since November 2023, according to Vanda.

The S&P 500 gained over 1% on March 23 after a social media post from President Donald Trump gave investors hope that leaders were working to end the war soon. So the net selling that occurred that day was likely retail investors looking to take profits. They net bought over half a billion worth of stocks the previous trading day as markets fell.

Vanda noted that retail participation in single stocks has gradually declined since the start of March, as equities move lower. But that doesn't mean retail investors are getting out of the market entirely.

Retail investors have been buying fewer single stocks in recent weeks.

"I am more cautious than ever because the risk of stagflation, geopolitical tensions and AI makes it hard for me to decide what a long-term thesis would look like," said retail investor Duncan Forbes.

This caution has caused Forbes to diversify. He said he plans to invest more into ETFs and is considering increasing his exposure to bonds.

David-Michael Cook, another retail investor, has also been playing defense with his portfolio. But he's not letting the scary headlines get to him.

"People in my age bracket have had seven to nine 'once in a lifetime' events happen since we were in high school, so there is always a sense of things potentially shifting," Cook said.

Cook said that he diversifies his investments across multiple industries, looking for companies that are "broadly nondiscretionary" and are well-positioned regardless of the macroeconomic forces shifting the market. He said that this defensive strategy meant he only invested a small portion of his portfolio in AI stocks, limiting his upside as those stocks rallied over the past few years.

Yet at the same time, he feels confident that he can weather any market storm.

"The last year has been tough and the next year will be tougher, but I'm optimistic that I'm set up as well as I can be," he said.

According to a new report from Finimize, Cook isn't the only retail investor feeling optimistic. The study found that 68% of retail investors expect global stock markets to grow over the next 12 months, an uptick from 61.3% last quarter.

This extra confidence comes despite the war in Iran causing volatility in the oil and equities markets, and even as investing pros on Wall Street feel apprehension about risks of potential stagflation and interest-rate hikes.

"Retail investors have largely leaned into weakness, while institutional investors have been quicker to de-risk, suggesting that fear-based selling has been more pronounced among the supposed 'smart money.' This pattern also shows up in bonds, where investors have been even more reactive and pessimistic than their equity counterparts," said Mark Hackett, the chief market strategist for Nationwide.

However, while institutional investors are de-risking, retail investors are staying the course. The Finimize survey found that nine out of 10 respondents said they were planning to invest the same amount or more in the next three months compared to the previous three months.

Only a small amount of respondents said they would invest less.

Retail investors are expanding beyond single stocks

According to the Finimize survey, retail investors have been leaning more and more into ETFs as of late. The survey found that 62.5% of retail investors plan to invest surplus cash into ETFs, which is up from 58.9% last quarter.

Money has continued to flow into ETFs, which tend to be popular with the retail crowd. A representative for EPFR, a division of ISI Markets, said about $50 billion has flowed into U.S. equity ETFs so far in March, roughly on par with the amount they received in February.

More retail investors are also interested in commodities, with 18% saying they'll invest in commodities going forward, according to Finimize, compared to 15.5% last quarter. This increased interest in commodities comes after precious metals like gold (GC00) and silver (SI00) rallied going into the start of 2026.

Although those metals have since fallen off of their highs, crude oil (CL.1) (BRN00) has climbed higher since the start of the Iran war, giving retail investors a new commodity to trade. Retail investors gained exposure to crude oil through ETFs, like the United States Oil Fund ETF USO. According to data from Vanda Research, the United States Oil Fund ETF saw its largest influx of retail traders on record in early March.

Data from online brokerage eToro $(ETOR)$ found that commodities now account for approximately 28% of retail investor portfolios. This is primarily due to an increase in popularity for gold, with 63% of individuals invested in commodities holding gold. However, retail is also exposed to other commodities as well. Thirty-eight percent of retail commodity investors held silver in their portfolios, 36% held oil, 26% held natural gas and 21% held copper, according to an eToro survey.

"Even prior to the recent geopolitical turmoil, retail investors demonstrated a strong lean toward commodities, and gold in particular," eToro investment analyst Bret Kenwell said of the survey data.

"The narrowing information gap between Main Street and Wall Street means that retail investors are now executing more sophisticated macro trades, like rotating into gold or non-U.S. equities, as they consider other factors like currency swoons and central-bank policy shifts," he added.

This willingness to shift strategies has helped retail investors feel better about their portfolios in the face of macroeconomic risk. While only 46% of retail investors in the eToro survey reported confidence in the global economy, 78% said they were confident in their own investing.

-Gordon Gottsegen

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(END) Dow Jones Newswires

March 25, 2026 09:42 ET (13:42 GMT)

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