Nearly 2 years after the meme stock revolution, retail traders are holding on even as volatility hammers markets in 2022

The stock market ended August on a low note.

Two years after a flood of bulls entered the market, there's no sign that withering volatility in 2022 has hurt retail investors' faith in the market.

Retail's most bullish participants are pushing a "diamond hands" view despite a bearish turn from professional traders.

Don't ever sell.

That consistent bullishness has puzzled some observers, but there might be an explanation for the attitudes of the permabulls among retail traders.

Many young investors have never experienced a recession while investing in the stock market, which is one of the reasons why the volatility is part of the game.

Dan Suzuki, deputy CIO at investment manager RBA, told Insider that the investors who flooded the market with cash are still in a good position to bet on their favorite stocks even though inflation has kicked up to 40 years old.

"Household balance sheets are still flush with cash, and the stock market hasn't yet fallen enough to cause investors to give up hope, or even to wipe out the gains of the past few years." Many investors see themselves as playing with house money.

Net flows from retail investors into the stock market averaged over $1 billion a day through the first half of the year despite brutal ups and downs. Since 2020 there hasn't been a negative day of retail flows, and retail investors have tended to ramp up their purchases of stocks on losing days for the market.

The opportunity to buy volatility is more important than the risk of managing it.

I think what we're seeing is normal. Over the past decade, investors have been taught that buying the dip is always a good idea.

Andrew Simonov said those experiences could be to blame for flooding the market with overconfidence. Many investors may think they are more skilled at trading than they actually are.

Simonov said that this makes them more vulnerable to underestimating the risks in the event of a full blown recession.

Those people didn't see a downturn. The group says, "Come on, nothing is going to change, but the stock prices are always going up and let's go with it." Keep going, we have small problems now.