Wall Street sees retail investors becoming ‘a force’ in the markets
It wasn’t too long ago that many professionals working on Wall Street might’ve associated retail investors with the infamous GameStop meme rally and all the meme stock rallies that followed in its wake.
This was seen as a sector of mischievous tricksters looking to game the system for money and kicks.
But in the same way the crypto industry has grown up and (mostly) put its “Wild Wild West” days behind it, the retail sector is also being viewed as an increasingly sophisticated investment sector.
And while the meme stock rallies are still happening (look no further than Beyond Meat’s surge last month), there is clearly more to the sector than just Reddit-driven phenomena.
This is why retail investors, just as with crypto, have gained a reputation as being a vital part of the capital markets among the professionals who might’ve dismissed them in the past.
John Marshall, head of derivatives research at Goldman Sachs, noted in a recent podcast how the days when institutional investors would think to sell off whatever stocks retail is pouring money into are over.
He noted that AI is unsurprisingly one of the hottest themes retail investors are following this year. Marshall said that his research shows five times the amount of Nasdaq 100 buying than in 2021 within this sector.
“A lot of people like to think of it as a contrarian indicator,” he said. “Okay retail is really hot on a particular stock or sector, so that’s a sell signal. But we find that not to be true. You generally want to be following this cohort of investors and monitoring their enthusiasm level.”
It’s not just single stocks where retail is showing its influence. Marshall said that individual investors are also putting significant money into ETFs.
In fact, there has been $350 billion in inflows into ETFs from retail investors this year, which is even bigger from the last data point of 2021 when there was $300 billion in inflows.
Marshall notes that retail investors are also heavily invested in single-stock options, with $420 billion traded per day in 2025, showing anticipation in short-term moves in the market.
He has actually seen the biggest single-stock option moves during this latest earnings season since 2009, which means there has been “financial crise-level earnings day moves in stocks” that has helped increased earnings day volatility.
“We’ve always known the retail investors are an important part of equity holders, but only recently we have realized how much this activity can really impact markets,” Marshall said.
Retail was early on some of today’s biggest stocks
The importance of retail money is also growing in the private markets, which can be seen by Charles Schwab’s (SCHW) recent acquisition of private market specialist Forge Global (FRGE).
Schwab has been pushing to increase access to alternative and private markets for its qualified retail investors. And the capital markets are now welcoming an influx of new retail money into markets that have historically been reserved for institutional investors.
With companies in recent years waiting longer to go public, the private markets have grown more important — and the push for retail money has increased.
“We’re seeing that trend pick up,” Bryan Yeo, group chief investment officer of Singapore’s sovereign wealth fund GIC, said at the Milken Institute Asia Summit in Singapore last month. “We do think private markets over time will get increasingly commoditized and democratized.”
Wedbush analyst Dan Ives is also seeing the growing influence of retail investors on the markets, calling them “a very important investor class that’s very informed” in an interview with Yahoo Finance.
He points out that retail investors were early supporters of stocks that have now surged, including Tesla (TSLA), Palantir (PLTR) and Robinhood (HOOD).
“There are many retail investors that understand Tesla better than institutional investors,” Ives said.
In terms of Palantir, he said that “institutional laughed when this stock was a teenager and then they’re crying when it turns $100 and screaming from the mountaintops when it turns $200.”
He doesn’t dismiss the importance of institutional, but Ives says that you also can’t discount what retail is doing.
“Retail is becoming just a force in these markets,” he said.
One of the changes that Ives has seen in talking to retail investors across the globe is in their growing level of sophistication, even showing him intelligent investment theses about the stocks they are following.
“Retail investors will ask questions that maybe only the most sophisticated institutional investors would’ve asked two, three years ago,” Ives said.