Exclusive: Investors reposition for a year of unknowns
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Retail investors turned into net sellers in December, ending a three-month winning streak against the S&P 500, per Charles Schwab's Trading Activity Index, which tracks the retail trading activity of millions of customers.
The big picture: The selling was modest, which suggests that investors were repositioning to wrap 2025 rather than turning bearish and setting up for a year of active stock picking as the AI trade gets messier.
What they're saying: 2026 will become more of an active "stock-picker type market" and less of investors buying a sector or broader indexes, Joe Mazzola, the head trading and derivatives strategist at Charles Schwab, tells Axios.
- Among the top five performing stocks of the S&P 500 for 2025, none were members of the Magnificent 7, and only two of those stocks outperformed the broader index.
- There has also been significant multiple expansion not just among tech stocks, but also in other corners of the market. Mazzola points to Costco shares trading at 50 times earnings at one point in 2025.
Zoom in: The information technology sector flipped from the biggest net buy in November to the biggest net sell in December, according to Schwab.
- Consumer discretionary, health care, industrials and energy were among other sectors marked by net selling last month.
- Stocks sold included Tesla, Palantir, Intel, Rivian and Warner Bros.
- Stock buys included Netflix, Nvidia, Broadcom, Amazon and Alphabet.
Zoom out: The broad market puttered into the end of year and the first day of trading for 2026, with stocks down 1% over the last five trading days.
- Even days that opened firmly in the green ended in the red, indicating there is "not a lot of conviction" among investors, Mazzola says.
Between the lines: Investors will have to work harder to find corners of the market with more room to run since so many stocks have rallied to records.
- That kind of backdrop can push investors to trim their gains in order to have cash to deploy when they do find opportunities.
What we're watching: Where investors put money to work next.
- Will they keep money on the sidelines as they wait for opportunities for growth to appear? Or will Big Tech earnings lure them back in?
- The AI rally may prove to be too good to be true. But that is not the case yet, and investors don't want to leave the party before it is really over.
