LONDON: Retail investors have won again. When trade tensions flared in early April and about US$6.6 trillion in market value vanished from US stocks in just two business days – the fifth-worst two-day drop since the S&P 500’s creation in 1957 – they didn’t panic.
Instead, they did what they’ve learned to do over the past 15 years: They bought the dip. Six weeks later, the US stocks benchmark has not only recovered but surpassed its pre-tariff levels, delivering a gain of about 17 per cent from the lows to those who kept their nerve.
Individual investors have become an increasingly powerful force in markets. At the end of 2024, they collectively held US$35 trillion in US stocks – 38 per cent of the market, according to US Federal Reserve and Goldman Sachs data.
And they’re not afraid to trade: They came into the year accounting for about 19.5 per cent of US equity-trading volume, according to Bloomberg Intelligence analyst Larry Tabb – up from 17 per cent a year prior and well above pre-pandemic levels.
While this is below the 24 per cent peak reached during the meme-stock frenzy at the beginning of 2021, commission-free trading has created a sustainably higher level of retail engagement.
POSITIVE OUTLOOK ON DIPS
When markets tumbled in early April, these retail investors sprang into action. At Charles Schwab, whose 37 million active brokerage accounts represent a significant slice of America’s retail investors, customers executed nearly 10 million trades per day in the first two weeks of the month, a 36 per cent jump from trading activity earlier in the year.
The firm additionally saw a surge in account openings. “We’ve seen in the first part of April, two to three times the level of new accounts being opened,” said Chief Executive Officer Rick Wurster on his earnings call. “We think there are some clients that want to get into Schwab and buy the dip.”
Robinhood Markets reported similar momentum with its equity trading volumes hitting four-year highs and options activity approaching record levels.
