Retail Investing Soars Amid Low Savings—What it Means for Equity Markets

Retail trading accounted for 20 percent to 25 percent of total activity this year, according to trading data from J.P. Morgan.

The American flag and a sign for Wall Street are shown outside the New York Stock Exchange, Monday, July 15, 2013 in New York. AP Photo/Mark Lennihan

This year marked another year in which retail investors joined Wall Street in droves, shaping the short- and long-term direction of asset prices and the economy.

According to analysts at JPMorgan, retail investors moved $300 billion to Wall Street in 2025, up from $197 billion in 2024. This figure exceeds the previous peak of about $270 billion during the 2021 retail trading surge.

Meanwhile, retail trading accounted for 20 percent to 25 percent of total trading activity this year, peaking at a record high of about 35 percent in April, according to separate trading data from J.P. Morgan (JPM).

Shifts in Retail Investing

The new cohort of investors rushing to mine the riches of Wall Street is younger and less affluent than previous cohorts, driven by rapid changes in the investor landscape, an August JPMorgan Chase report covering the period of 2015–2025 found.

Specifically, the number of investors transferring money from checking accounts into investment accounts—and the dollar amounts invested—are now several times higher than in 2015.

This trend accelerated over the past two years, with retail investing flows rising by 50 percent and reaching pandemic levels in early 2025, both in terms of the number of people moving money into investment accounts and the dollars transferred.

The survey further reveals several features of the new retail investor trend.

One feature is broader participation across income groups, particularly among lower-income households. This continues the COVID-19 pandemic-era trend of narrowing the participation gap between high- and low-income investors, although the gap remains sizable.

Another feature is a generational shift, with retail investors entering Wall Street at younger ages. About 37 percent of 25-year-olds in 2024 have made transfers into investment accounts since age 22—roughly six times the share in 2015.

A third feature is a growing gender difference, with men being more active investors than women. Funds transferred to investment accounts rose more among men than among women, though the gap remains smaller than during the pandemic.

The JPM survey further identifies several factors that have contributed to the broader participation and engagement of retail investors in Wall Street: easier access through tech and mobile apps, lower minimum balances, lower transaction fees, the strong performance of the equity markets in recent year, which created a “me too,” mentality, and a shift in behavior in accumulating wealth from homes to equities.

Adding to these factors was the pandemic, which created an ideal environment for day-trading, including ample time, as people stayed in place, and abundant liquidity due to massive monetary easing that drove short-term interest rates to near zero and included stimulus checks that boosted the savings rate to 32 percent.

Still, the invasion of Wall Street comes during a period of declining household savings. According to Federal Reserve data, the U.S. household savings rate has dropped from approximately 6 percent in 2015 to roughly 4.7 percent in 2025 (though it spiked during the pandemic).

A downward-trending household savings rate will eventually slow down the flow of funds from household bank accounts to investment accounts.

Implications for Equity Markets

However, the growing participation of retail investors on Wall Street has several implications for equity market performance in the short and long term.

One short-term implication is increased market volatility, as retail investors are momentum-driven and tend to imitate other investors’ behavior, thereby taking on greater risk and trading more actively, according to a Nature study.

Another short-term implication is the rise of market pricing anomalies, namely the disconnect between market prices and intrinsic values, which are determined by the economic and financial fundamentals of the underlying companies.

A recent paper in the Journal of Risk and Financial Management comparing retail and institutional sentiment found that retail bullish sentiment is negatively associated with subsequent stock returns, possibly due to overoptimism and noise trading.

The rise in price anomalies during periods of greater retail investor participation in Wall Street often leads to stretched market valuations (higher price-to-earnings ratios), increasing the risk of long-term bubbles.

A clear demonstration of price anomalies that can lead to bubbles is the meteoric rise and fall of AMC and GameStop (GME) stocks during the pandemic, in which bullish investor sentiment was driven by the “halo effect” rather than fundamentals.

The halo effect is a form of selective bias in the emotion-processing portions of the brain, in which investors focus on a company’s standout characteristics rather than its fundamentals.

In the case of AMC and GME, the characteristic that stood out was “short interest”—shares shorted as a percent of the available shares (float). This created the possibility of a short squeeze—the forced purchase of shorted shares by short sellers—which became a self-fulfilling prophecy as scores of small investors turned bullish on the two stocks in a herd-like behavior that turned a short squeeze into a bubble.

It all ended poorly, as both stocks ended up trading at a fraction of their bubble high.

Retail Versus Institutional Investors

By contrast, institutional bullish sentiment tends to correlate positively with future returns.

Srbuhi Avetisyan, Research & Analytics Lead at Owner.One, provides further insight into the behavioral differences between retail and institutional investors.

“What stands out in our data (Penguin Analytics — 13,500 families globally) is that retail investors behave like ‘event-driven participants,’ whereas institutional investors behave like ’system-driven participants,” he told The Epoch Times.

“Retail investors influence short-term market dynamics because their behavior is reactive, sentiment-driven, and highly correlated with news cycles. But structurally, they lack the frameworks and information continuity that institutional investors depend on—which means their long-term impact is limited by volatility in behavior rather than capital volume.”

Avetisyan explains that institutions can act consistently because they operate within governance systems: mandates, rebalancing rules, liability matching, and internal risk controls.

“By contrast, households often fragment their assets, lose track of accounts, or make decisions without full information. In our research, more than 70 percent of household-level capital erosion happens for informational reasons, not market reasons.”

While the findings of these studies suggest that a growing retail presence on Wall Street may be destabilizing, other studies suggest it can be a stabilizing force during market events.

For instance, a working paper by the Columbia University School of Law finds that stocks with high retail ownership experienced higher liquidity and lower crash risk during the pandemic shock, particularly in less volatile stocks.

“Retail investors are usually described in extremes. Either they’re reckless amateurs or a disruptive force taking on institutions. Neither is accurate. They’re not driving markets. Institutions still control liquidity, pricing, and long-term capital flows. What retail investors change is how decisions play out when things get uncertain,” Med Yacoub, marketing director at Tradesk Securities, told The Epoch Times.

Yacoub is referring to a recent Columbia Business School paper titled “Exploiting Myopia: The Returns to Long-Term Investing,” in which researchers Kalash Jain and Dian Jiao analyzed decades of U.S. stock data to compare how institutional investors behave with retail investors who can afford to hold through uncertainty.

“Their finding was consistent. Stocks that institutions sold under short-term stress later performed better. On average, those stocks delivered annual returns approximately 5 [percent] to 6 percent higher. In volatile companies or firms coming off losses, the gap widened further,” Yacoub said.

He believes this wasn’t retail investors exhibiting restraint, as they don’t recognize signals that well, and it wasn’t about discipline or patience.

“It was about being unknown. Retail investors don’t always know what they’re looking at in real time. When prices move sharply or headlines hit, they hesitate. Not because they’re calm or confident, but because they’re unsure.

“Institutional managers don’t have that luxury. They are trained to recognize patterns and respond quickly. When something breaks, they act. Speed is part of the job. And most of the time, that speed is an advantage,” he said.

Vince Stanzione, CEO and founder of First Information, stated that retail investors can influence small-cap stocks, as seen with so-called meme stocks such as GameStop.

“However, the large-cap shares are still dictated by the institutions and, more importantly, Exchange Traded Funds (ETFs) and pension funds.

“If you look at the major shareholders of any U.S.-listed company—for example, Nike (NKE)—the three largest shareholders are Vanguard, BlackRock (iShares), and State Street, which is due to their holdings in ETFs,” he told The Epoch Times.

“Retail investors continue to increase exposure to U.S. equities, but not by single-share selection, rather [through] ETFs.”

Reuters contributed to this report.