As the U.S. election approaches, retail investors are making significant moves into tech stocks and U.S. Treasury-based ETFs, signaling both confidence in tech giants and caution through government-backed assets. This shift has been especially noticeable among UBS’s U.S. retail market-making clients, who finished the week with a notable $35 million in net inflows, marking two consecutive days of buying momentum. The combination of tech inflows and a flight to the safety of U.S. Treasuries has pushed overall flows into positive territory.

Tech Stocks Rebound with “Magnificent 7” Leading the Charge

One standout feature of this week’s activity was the renewed interest in tech stocks, the first net inflows in this sector since mid-September. The influx was primarily driven by the “Magnificent 7” – a group of top-performing mega-cap tech stocks that include giants like Apple, Microsoft, Amazon, and others. These stocks collectively experienced their largest inflows since the market turbulence of early August, signaling that retail investors remain bullish on established tech leaders despite recent market volatility.

The Magnificent 7’s popularity stems from their resilience and growth potential, even in times of economic uncertainty. Their solid balance sheets, innovative advancements, and market dominance have made them a preferred choice for those looking to capitalize on growth while maintaining a degree of stability in their portfolios.

Treasuries and Short-Term Bonds: A Flight to Safety

While tech stocks captured a significant portion of investor interest, there was also a strong push into U.S. Treasury and government-backed ETFs. In fact, this segment saw the largest inflows of 2023, with investors particularly focused on short-term Treasuries and T-Bills, such as the Short Treasury Bond ETF (SHV) and SPDR 1-3 Month T-Bill ETF (BIL). As uncertainty around the election grows, many investors see these instruments as a safe haven that provides a reliable, albeit modest, return while protecting capital from potential market fluctuations.

This preference for short-term Treasuries suggests a cautious approach, where investors are prioritizing liquidity and minimizing exposure to market risks. By investing in assets like SHV and BIL, they can keep their capital relatively secure while retaining flexibility for rapid reallocation, depending on election outcomes or market responses.

DJT Sees Major Volume Surge but Concludes with Heavy Selling

The week also saw significant action surrounding DJT (Trump Media and Technology Group), with retail volumes spiking in anticipation of the election. However, despite the initial momentum, DJT closed the week on a different note. Friday recorded the largest DJT outflows since its inception in March, as three consecutive days of intense selling drove volumes down sharply. This shift suggests that while some investors were initially optimistic or speculative, broader sentiment turned bearish as the week progressed.

What This Means for Retail Investors

The simultaneous attraction to both high-growth tech stocks and low-risk Treasuries underscores the mixed sentiment among retail investors as they navigate an environment shaped by both market opportunity and cautionary uncertainty. This trend also speaks to the flexibility and adaptability of retail investors who are willing to diversify across both ends of the risk spectrum. As we approach the election, we may see continued interest in both these areas, with potential adjustments based on election results and subsequent economic impacts.

For now, the influx into tech and Treasuries reveals a strategic blend of optimism for tech-driven growth and a pragmatic approach to preserving capital. As always, investors are encouraged to keep an eye on economic indicators and adjust their portfolios in alignment with both their risk tolerance and long-term financial goals.