Millions of amateur investors got into the stock market during the pandemic - some gingerly, some aggressively, some determined to teach Wall Street bigwigs a lesson - and almost could not help but make money, riding a bull market for the better part of two years.
Now they may have to wrestle with a bear.
"It definitely isn't as easy to trade in this market," said Shelley Hellmann, a 47-year-old former optometrist in Texas who began actively investing in April 2020 while isolating from her family.
Tracking stock movements on an iPad Mini in her bedroom, she banked big gains as the market soared. Within a couple of months, she was considering making day trading a full-time gig. But since the S&P 500 peaked Jan. 3, profits have been harder to come by.
"Sometimes I am glad to not be red for the year," she said.
Five months of bumpy declines have put the S&P 500 on the precipice of a bear market - a drop of 20% or more from its most recent high, which is considered a psychological marker of investors' dimmed view of the economy. Including a tumble of 4% Wednesday, the index is down more than 18% from its peak Jan. 3.
In response, many of the estimated 20 million amateurs who started trading in the past two years - whether bored sports bettors or meme-stock aficionados who piled into GameStop - have tapped the brakes or scrambled to shuffle their portfolios into more defensive positions.
S&P Global Market Intelligence, which analyzed April data from Charles Schwab and Interactive Brokers, said retail trading activity was down 20% compared with the meme-stock frenzy of January and February 2021. Popular retail brokerages report fewer active users; Robinhood, the choice of many amateurs who jumped in early in the pandemic, said last month that it had 15.9 million active users in March, down 10% from a year earlier and off 8% from the end of last year.
The recent decline, the company said, was tied to "users with lower balances, who are engaging less in the current market environment."
The mood has even cooled on Reddit forums like WallStreetBets. In the heat of the rising market, invincible traders congregated there to joke that stocks only went up. But the irrational exuberance has given way to darker humor: One recent post included an image of the grim reaper slaying low interest rates and stock market bulls.
Jonathan Colon got out as the market began its retreat. He put $3,000 into a Robinhood account last June and sold everything early this year as stocks slid in January. He cashed out with a $100 loss.
"It was like when you get smacked on the hand a few times as a kid and you learn not to go here or there," he said.
Colon, 33, who will graduate from Brooklyn College this month with a finance degree, was inspired to invest by a stock market competition that one of his professors offered as extra credit in March of last year. Wheeling and dealing a $1 million mock portfolio, he sought out companies that appeared to have been sold off too aggressively, making them cheap buys, or those that traded above their usual range, making them candidates for a short sale.
A few months later, he began investing his own money but struggled to replicate the returns of his mock portfolio. Certain stocks were unavailable for shorting, for example, and trading so frequently was expensive. Although there were no commissions to pay, the bid-ask spread - the small difference between the highest price a buyer is willing to pay and the lowest a seller is willing to accept - kept costing him fractions that added up.
By January, some of his classes had resumed in person, and with them his onerous commute from the Bronx. Instead of trading for an hour every morning, he cut back to twice a week. The market was also becoming a lot choppier, and it was increasingly difficult to hold his positions. He had always used stop-loss orders - instructions to sell when a stock dropped to a certain price - to prevent disastrous declines. But with constant drops, he kept getting pushed out of his trades.
"Just when you think it wouldn't go lower, it would," he said. With less time on his hands and more volatility in the market, he sold everything "for safety purposes," he said.
Although the stampede to open new brokerage accounts has abated, retail trading activity remains well above pre-pandemic levels - a testament to the sheer number of people who took up stock trading as the coronavirus upended normal life. Retail brokerages saw two to three times as many account openings in 2020 compared with the year before - a pace that accelerated through the first half of 2021, according to estimates by JMP Securities.
Thomas Mason, a senior research analyst at S&P Global Market Intelligence, said that despite the market's recent tumbles, retail traders are not necessarily panicking. "They seem to be reallocating, shifting out of high-risk growth stocks into less risky investments," he said.
Even if their tastes have changed, they are a slice of the trading population that is still showing an appetite. As of the end of April, TD Ameritrade, part of Charles Schwab, said its retail customers were still buying more stocks than they were selling, according to its Investor Movement Index, which measures retail investors' behavior and sentiment, based on a sample of accounts that completed trades in the past month. Their interests have been shifting toward less volatile names and more stable holdings like shorter-term bonds, the firm said.
Hellmann, who started actively trading in the early days of the pandemic, said she was sticking with it, learning more and refining her approach as she goes along.
She often rises at 3 a.m. and turns on CNBC to begin plotting her strategy for the day, which involves studying stocks' price movements, a process she compared to learning to catch a softball - watching its arc, then trying to figure out the physics of where it will land. "That is what I'm doing with price and volume," she said.
Long a buy-and-hold investor, she began with roughly $50,000 - money that came from shares of ConocoPhillips that she inherited in 2014 after the death of her grandfather, who had been a propane salesman. Her approach has grown increasingly complex over the past two years. Last fall, she took a large position in an exchange-traded fund that bets against the price of natural gas - which has gone up as Russia's invasion of Ukraine roiled energy markets.
"The war causing natural gas to spike up at a time when it seasonally comes down did not help me much," she said.
Even so, she has more than quintupled her money since early 2020, riding the strength of a rally that has the S&P 500 up nearly 80% since it bottomed out in March 2020, even with its recent fall.
Experiencing losses after a period of gains can be instructive, said Dan Egan, vice president of behavioral finance and investing at Betterment, which builds and manages diversified portfolios of low-cost funds and provides financial planning services.
"If you have a good initial experience with investing, you see this is part of it; it will be OK," he said. "We get bumps and bruises that you need to learn what pain feels like," he said.
Eric Lipchus, 40, has felt plenty of pain in his nearly two decades of full-time day trading; he owned options on Lehman Brothers, the investment bank that imploded during the financial crisis of 2008-09. Before that, he had watched his older brother and father dabble in the markets during the dot-com boom and bust.
"I have been on a roller coaster," he said. "I am making OK money this year, but it's been up and it's been down. It seems like it could be a tough year - not as much upside as in previous years."
Challenging conditions like investors are now facing can get stressful in a hurry, Lipchus said. Right now, he is keeping half his portfolio in cash - and is taking a fishing trip to the Thousand Islands in a couple of weeks to clear his head.