What Changed?
Retail investors are showing weaker conviction: the latest data shows them cutting back on purchases of American equities and ETFs. Even on losing days, where they would historically invest. This isn’t a panic-wave of selling; it’s a decline in participation with fewer investors buying the dips and, more recently, even scaling back in market-traded ETFs.
Retail flows have been a supportive undercurrent in 2025’s valuations, and, if they fade, the markets may rely more heavily on institutional players. With year-end positioning ahead, a slump in retail trading activity raises the question: Will momentum stall if the crowd stands down?
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The Numbers
Low net purchases: Reuters recently reported that retail traders just posted their third weakest net-buying day of 2025. This reflects a meaningful drop in conviction.
Falling trading volume: According to the head of equity strategy at Citigroup, retail’s share of US equity trading volume fell from around 16% earlier in the year down to 11% in the last few weeks.
Why It Matters
Retail investors are stepping back at a moment when markets usually benefit from broad participation.
Liquidity implications: When retail volumes thin out, liquidity shrinks in parts of the market that rely heavily on day-to-day engagement. This includes areas like high-beta tech stocks and other momentum trades.
Volatility concerns: With fewer “extra” buyers, there is less space to absorb additional volatility. This means institutional flows matter more, which can make markets feel stable on the surface. But underneath? It’s more fragile.
As per Ocean Park Asset Management’s chief investment officer, James St. Aubin, “investors are paying more attention to questions about valuations or whether we’re in an AI bubble.” And that’s an issue. The market needs those investors.
According to a paper by Simon Glossner, Pedro Matos, Stefano Ramello, and Alexander F. Wager, “retail investors provid[e] liquidity to stocks sold by institutional investors,” so “when a tail risk is realized, institutional investors amplify price crashes.”
Potential impact on the markets: According to Reuters, during the past two years, “buying on dips by retail investors” was “a major source of resilience whenever the market has hit bumps.” Without this group of investors, high-beta names are more exposed to institutional positioning. Thinner activity can also amplify reactions to any outside “noise” simply because there are fewer participants when news hits.
What to Watch
Keep an eye on investor response to upcoming catalysts, including:
· Corporate earnings (especially for consumer/tech stocks)
· Macro reports (inflation, employment)
· Policy commentary (from the Federal Reserve or other central banks)
If retail investors don’t bounce back in those moments, it signals that apathy is more entrenched.
Takeaway
The retail investor isn’t vanishing. They’re just quieter now. And that silence? It matters.
With fewer participants actively trading, the market may rely more on institutional investors, meaning thin liquidity could make trends more fragile than they appear.
— Lauren Brown
Editor, American Ledger
Sources:
Reuters, November 2025 https://www.reuters.com/business/retail-consumer/retail-investors-show-less-conviction-buying-us-stock-market-dips-2025-11-17/
Yahoo!Finance, November 2025 https://finance.yahoo.com/news/wildest-trading-day-since-tariff-103000020.html