The record rally in the stock market hasn't yet ignited a speculative FOMO mentality among day traders

• The record rally in the stock market has yet to ignite a FOMO mentality among retail traders.
• Vanda Research said that retail traders are cautious about buying declines in the stock market.
• "While it may feel like there's significant FOMO in the markets, hard data point to a cautiously optimistic retail cohort," Vanda Research said.

The stock market's rally to record highs this year has yet to ignite a FOMO mentality among retail traders, according to Vanda Research.

The firm said retail traders have been "uneasy" about aggressively buying declines in the stock market based on recent fund flow data, which shows that on a trailing week basis, retail purchases dropped to their lowest level since November 2020.

"We suspect many don't want to chance buying the top," Vanda Research said in a note on Wednesday.

The data from Vanda Research, which includes options trading activity, paints a different picture of current stock market sentiment compared to other indicators.

For example, the CNN Fear & Greed Index has been hovering in "Extreme Greed" territory over the past few weeks, and some market pundits are warning that the stock market is in a meltup that rivals the dot-com bubble seen in 1999 and 2000.

But when compared to the speculative trading bubble seen in 2021 when meme stocks like GameStop and AMC exploded higher, the current market sentiment among retail traders seems muted, as measured by options trading data.

"The scale of current speculative retail options activity is only a fraction of the GME & AMC bubble levels," Vanda Research said.

That's even when considering the surge in trading activity centered around a handful of AI and crypto-related stocks, like Super Micro Computer and MicroStrategy, among others.

"Current pockets of speculative retail activity in popular small caps only amount to <10% of spending compared to what GME and AMC alone attracted three years ago," the note said.

That suggests to Vanda Research that the "fear of missing out" mentality commonly found among retail traders during speculative rallies could eventually see a revival.

"While it may feel like there's significant FOMO in the markets, hard data point to a cautiously optimistic retail cohort instead. Of course, things can change quickly, but there's quite a ways to go before we have to start ringing the alarm on speculative retail activity," Vanda Research said.