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Investing.com -- Retail investors may be running out of steam after a strong run, according to a new note from JPMorgan (NYSE:JPM) on Thursday. 

The bank told investors that it sees signs that the recent surge in retail equity buying is losing momentum, which could limit further upside for U.S. stocks.

“After two strong months, the retail impulse appears to have slowed in May,” JPMorgan analysts wrote, referring to the flow of capital into equities, including leveraged and inverse ETFs. 

The firm noted that the earlier rally was “led by leveraged equity ETFs,” as retail investors embraced a “buying-the-dip mentality.”

However, the apparent cooling in retail activity comes as other sources of equity demand also wane. 

“A slowing of the retail impulse, more elevated equity exposures by equity-focused hedge funds, largely completed short covering by macro hedge funds, and continued lack of buying by foreign investors, all together imply more limited upside for U.S. equities going forward,” JPMorgan warned.

In addition to equity flows, JPMorgan flagged challenges for investors trying to hedge currency exposure. 

“Raising dollar hedge ratios is not straightforward,” the analysts noted, explaining that while equity investors may see currency risk as a diversifier, bond investors face “elevated” costs of hedging.

The firm also said that enthusiasm for the so-called “debasement trade”—which includes gold and bitcoin—has plateaued. 

“After rising sharply in Q4 2024, the overall debasement trade stalled this year and turned more into a zero-sum game between gold and bitcoin.”

Altogether, JPMorgan sees a “less favorable equity flow and positioning backdrop” heading into the summer.

This content was originally published on http://Investing.com