People are getting more aggressive about buying the dip in stocks. But they're playing a dangerous game.

• Another classic buy-the-dip episode played out in stocks this week.
• Investors stepped in to backstop equities the very next day after Trump tariff threats sent indexes down 2%.
• It's been a fruitful strategy over the last year, as traders bank on Trump walking back proposed policies.

Remember, just three days ago, when it felt like the sky was falling in the stock market?

You could be forgiven for forgetting. While the 2%-plus sell-off across all major US indexes on Tuesday certainly stung in the moment, it quickly gave way to dip-buying.

We ended Thursday ever-so-slightly below where we were at Monday's close, before President Trump's Greenland-linked tariff threats took a brief bite out of market sentiment.

If you think the rebound episode felt quick, you might be on to something. Yes, in the long run, stocks have always retaken past levels and rallied to all-time highs. But it's the sheer speed at which it's happening lately that's notable. We're talking one day.

I ran the analysis visualized below in order to test the theory. It shows the S&P 500 the very next day on each instance that it's fallen 2% or more in a given session.

As you can see, the S&P 500 has rallied each of the last five times — and quite a lot on four occasions. It's a far cry from 2024, when the index fell after three of four 2% sell-offs.

You'll notice that April shows up multiple times on the chart. That month kicked off with Trump's Liberation Day tariffs that wiped out 12% in a matter of days. The S&P 500's jagged recovery from there is responsible for all the entries you see.

What ultimately ended up happening matches the same overall conclusion: When the multiweek period of turmoil finally ceased, that's when the dip-buyers stepped in with the high level of aggression we've seen since.

While the size of these post-sell-off moves suggests a fair amount of institutional buy-in, the trend is also getting a boost from everyday investors.

JPMorgan identified it as one of the main themes that defined retail investors in 2025, with three main dip-buying episodes accounting for 75% of the group's stock positioning for the year. Those same day traders were out in force this week, accounting for the third-biggest dip-buying day of the past year.

For now, the post-pullback dip-buying bonanza is working out. Everyone seems to be on the same page. And Trump's tendency to quickly walk back policy announcements that shock the market — the good ol' TACO trade — is serving as a psychological backstop of sorts.

One remaining issue, as one shrewd X user points out, is that if investors increasingly assume the TACO trade will kick in, the market pullbacks that prompt Trump's reversals will diminish. This could make Trump even more aggressive, since he needs to see deep downturns before changing his mind.

Overall, the worst thing that could happen would be for people to automatically assume dip-buying power will materialize after every hiccup. Overexuberance, after all, is the hallmark of any major stock drawdown. So enjoy this trend as long as you can, and try to avoid being caught holding the bag if things go awry.