What Changed?
Retail investors have become a major force in U.S. markets. In the first half of 2025, they traded an astonishing $6.6 trillion worth of equities — $3.4 trillion in purchases and $3.2 trillion in sales.
Their enthusiasm peaked in April, when “Liberation Day” tariff announcements triggered a sell-off. Retail traders jumped in, buying a record $40 billion in stocks that month — the largest monthly inflow ever recorded. That buying spree, combined with a strong earnings season, helped propel markets to record highs this summer.
But now? The excitement has fizzled.
Why It Matters
Markets don’t run on fundamentals alone. Sentiment and expectations are just as powerful — and right now, retail traders are showing signs of apathy.
That’s dangerous because:
Liquidity risk: Retail investors often act as shock absorbers, buying when institutions are selling. Without them, dips could turn into deeper downturns.
Economic backdrop: The S&P 500 has rallied despite a cooling economy, slowing GDP, and a softer labor market. That leaves little room for error.
Potential shocks: Inflation surprises, weak earnings, fiscal policy shifts, or geopolitical risks could all jolt the market — and without retail buying support, the impact could be sharper.
Takeaway
The danger for markets isn’t panic selling from retail investors — it’s apathy. When retail traders stop paying attention, they stop providing the liquidity that often stabilizes downturns.
In the long run, stocks are driven by earnings growth, not short-term swings. As Fidelity reminds us, those who stay invested through the noise tend to see the best returns. But in the short term, a disengaged retail crowd could make the next shock hit harder.
— Lauren
Editor, American Ledger