In a surprising turn of events, US retail investors shifted their focus towards safer assets in September, leading to the largest net buying since April. According to UBS’s market making clients, there were $28 million inflows on Tuesday alone, with over $1 billion of inflows for the entire month. This rotation out of semiconductor stocks and into ETFs was led by near-record buying of gold ETFs, which saw $247 million in net inflows during the month.

The exit from semiconductor stocks was the largest monthly exit since May 2023, with Nvidia ($224 mn) and Applied Materials ($150 mn) being the main drivers of outflows. This shift towards safer assets can be attributed to the ongoing geopolitical tensions and concerns over inflation, which have led investors to seek refuge in traditionally safe-haven assets such as gold.

Defense spending was the second-largest recipient of inflows this year, with Kratos Defense being the most-bought stock across the platform following President Trump’s meeting with military leaders this week. This increased interest in defense stocks highlights investors’ desire for diversification and protection against potential market volatility.

The rotation towards safer assets is a notable trend, especially considering the recent surge in inflation concerns. As central banks continue to grapple with the challenges of economic recovery and inflation management, investors may continue to seek shelter in traditional safe-haven assets such as gold and defense stocks.

September’s retail investor activity highlights a shift towards safer assets, led by near-record buying of gold ETFs. This trend is likely to continue as investors seek protection against potential market volatility and inflation concerns.