While retail trading is nothing new, the current fever could have lasting implications. Retail trading has reached an all-time high, despite the month of Oct typically being a weaker month. Weekly retail-trading volume in the stock market reached $7B earlier this month – about 35% over the $5.3B weekly volume over the prior two months. This continues an upward trend in retail trading ever since the tariff-driven market slide in Mar-Apr 2025. This upward trend has now extended well beyond recovery and recently reached a new inflection point and steeper incline.

For the first time, a majority (54%) of working-class Americans earning $30K-$80K hold taxable investment accounts – with more than half of those entering the market within the past 5 years. The data suggests that retail trading is penetrating even lower-income households. According to JPMorgan Chase, Americans with below-median incomes represent 11% of dollars flowing into retail investment accounts (vs. 6% on average from 2010-2015) and 1/3 of individuals moving money into investment accounts (vs. 20% on average from 2010-2015).

Younger people are also much more likely to invest than before. In 2024, 37% of 25-year-olds used investment accounts vs. 6% in 2015. This can be attributed to factors such as the advent of commission-free trading (e.g. Robinhood, Webull) and “finfluencers” on social media. Rising home prices are also boxing younger people out from home ownership, and those saving for a down payment are putting their money into the market.

Stock-market returns have also outperformed their long-term historical average during the past 6 years. The S&P 500 (with dividends) returned an average of about 11% from 1928-2018. From 2019-2024, it returned an average of 18% (31% in 2019, 18% in 2020, 28% in 2021, -18% in 2022, 26% in 2023, 25% in 2024). So far this year, as of Oct 2025, the S&P 500 (with dividends) has already reached 14.5%.

Record-level retail trading has boosted brokerages like Schwab and Interactive Brokers Group, and helped large banks like JPMorgan, Goldman Sachs, and Citigroup blow out their revenue forecasts. Retail-trading platform Robinhood is up 12.9% since we wrote about it last month.

The risk-on sentiment has reached far and wide, touching AI and energy companies, options, crypto, prediction markets, and sports betting. Retail investors are chasing private investments in AI companies through SPVs (special-purpose vehicles). Given AI’s thirst for energy, energy stocks are being driven up as well. While most newer investors (69%) hold individual stocks, Robinhood’s recent growth is coming largely from options and crypto. (A small but growing subset of retail investors is engaging in highly risky, leveraged derivatives trading.) Crypto regulatory barriers coming down is drawing retail investors to companies like Circle, Coinbase, and OpenSea. Prediction markets used by retail investors are seeing strong interest, with Polymarket taking $2B from Intercontinental Exchange at an $8B valuation, and Kalshi raising $300M at a $5B valuation. Sports betting continues to be popular, with Americans betting $150B on sports in 2024 (up 24% from the prior year).

Private assets are increasingly being opened up to individual investors, through vehicles like ETFs, SPVs, mutual funds with private exposure, and closed-end funds. Robinhood, for instance, recently filed an application for a new publicly traded fund (Robinhood Ventures Fund I) that would hold shares of hot private startups and be open to retail investors. There’s been growing regulatory momentum in this realm, with policymakers recently allowing 401(k) accounts to invest in private assets and alternative investments.

Already, there are signs of trouble – the most significant being the softness in the labor market (which could be boosting stock-market participation). Unofficial numbers from last week are showing rising unemployment and loss of private-sector jobs. Recent layoffs have come from Amazon, Nestlé, Chevron, and NBC News, not to mention the layoffs expected in the federal government. Other worrisome signals abound, including higher delinquencies on subprime auto loans, concerns about regional banks’ loan portfolios, Trump’s threats of 100% tariffs on China, China’s tightening of rare-earth supplies, and a new potential shortage of auto chips. Not every investor is risk-on – gold is being viewed by some as a safe haven, with prices recently reaching an all-time high.

There is a small but growing clamor among AI industry insiders – including OpenAI CEO Sam Altman and Meta CEO Mark Zuckerberg – who are calling the AI boom a bubble. That is not to say that they plan on halting their sizable infrastructure investments. As Zuckerberg puts it, “[T]he risk is higher on the other side…[the risk of being] “out of position on what I think is going to be the most important technology that enables the most new products and innovation and value creation in history.”

Not all bubbles are bad – they can align capital and talent into the necessary simultaneous parallel investments and activities to enact a major technological transition. Altman and Zuckerberg are, at least in part, reacting to inflated valuations for “AI startups” – and possibly hoping to let some air out of expectations to fend off a collapse. (It also may benefit the leaders if the lower tier of AI startups eating up capital wash out sooner rather than later.)

If asset bubbles deflate, the losers will include “me-too” AI startups and the middlemen SPVs touting them; risk-on investments like crypto; and highly leveraged retail investors engaging in speculative derivatives/options trading. While wealthier consumers and those investing conservatively may be okay, the picture is different for lower-income investors teetering on the brink of financial security and engaging in speculative investing.

Now that these lower-income and younger investors have entered the market, they are unlikely to step away – unless they are later barred by financial insecurity. 80% of lower-income investors plan to continue investing for at least 3 years (if not more).

This is a structural shift – one with cycles. The last wave of retail traders has become more knowledgeable (for better or worse, given the tendency of a subset to delve into risky derivatives). Newer retail investors – who often learn about investing through video-sharing sites like YouTube (36%) and social media (35%) – have the reputation of being relatively unsophisticated, and their volume will help feed PFOF (payment for order flow) engines. (The average retail trader conducts just 6 min of research before initiating a trade.) As AI reshapes labor markets, we may see more people with nontraditional finance backgrounds take on the role of capital allocators.

Going back to our original question, the rise in retail investing appears to be both a bubble and a shift. It is likely to make for a more volatile market – at least in the near term.

Sep 12 2025 (3 Shifts): Copy trading & Robinhood Social

Dec 18 2020 (3 Shifts): Are Robinhood and the Fed propping up bubbles?