Investors have debated since 2021 whether the significant increase in retail trading volumes is driven by structural forces or by cyclical ones. The recent spike in retail activity following Liberation Day now provides strong evidence that retail flows are primarily cyclical in nature, though are now on a permanently higher baseline created by structural technological & communication-related changes since the pandemic.

The original surge in retail participation during ‘20-’21 coincided with a set of extreme and uniquely co-occurring macro conditions: near-zero interest rates, fiscal stimulus, and stay-at-home restrictions. Retail investors’ share of total U.S. equity trading doubled from ~10-12% pre-COVID to about 25% at the ‘21 peak, according to Bloomberg Intelligence. At the time, analysts debated whether this increase in retail trading activity represented a structural step-change or was rather the product of short-term speculation. The absence of a clean macro cycle then made it difficult to distinguish one explanation from the other.

That distinction became more obvious in early ‘25. The sharp market sell-off in March, followed by the quick rebound post-Liberation Day, produced a clear cyclical swing in retail trading volumes. According to VandaTrack, individual investors’ net equity purchases exceeded $1.5B per day in the two weeks following Liberation Day, which was nearly double 1Q25 average. The spike closely tracked to consumer sentiment indices, showing a possible correlation between retail trading activity & consumer perceptions of economic expectations.

It can be useful to look through historical context for further evidence. Cboe Global Markets reported that pre-market and sub-$1 retail trading volumes hit new records in Q2 2024, a period that many consider to be driven by renewed “risk-on” enthusiasm resulting from AI-related headlines. Yet by YE those same volumes had retraced to near mid-’23 levels which evidenced what was likely the erasure of a speculation-driven trading environment vs anything related to a  secular change. Retail flow thus, in short, still behaves cyclically, spiking during periods of optimism and contracting when macro headwinds return.

1H25 economic data showed evidence that furthered this point of retail trading volume being explained by points of cyclicality. As household excess savings dwindled and borrowing costs climbed to their highest levels since ‘07, retail trading activity decreased significantly. The Federal Reserve’s Survey of Household Economics and Decisionmaking (SHED) showed a significant decline in the share of U.S. adults reporting “financial comfort,” a trend that aligned with a slowdown in app-based trading volumes on platforms like Robinhood and Webull. Retail behavior continues to reflect the broader liquidity cycle.

Nonetheless, it’s important to note that there are strong forces which clearly resulted in a one-time step-change increase in retail trading volumes. Recent innovations in consumer brokerages including commission-free trading, fractional share access, and mobile execution have permanently reduced frictions. Retail-order wholesalers such as Citadel Securities and Virtu now handle over one-third of U.S. equity volume, up from roughly one-quarter before 2020. Simultaneously, the maturation of retail communities on platforms like X and Reddit’s WallStreetBets has institutionalized a new mechanism of information sharing and trading coordination among retail, making trading volumes more durable even when capital flows ebb.

The data and correlations made post-Liberation Day have allowed investors to finally make conclusions about the secular/cyclical nature of retail trading activity, that the decreased friction and increased access to communication have permanently lifted retail participation above pre-pandemic levels, but it still rises and falls with macro cycles, sentiment, and liquidity.

Research Team

Torrin Gordon, LSE, Evercore, Point72