Retail investors are becoming a core driving force of the rise in US stocks: net inflows in 2025 are expected to reach a new high, with AI and ETFs becoming increasingly popular.

Analysts say that with individual investors becoming the driving force behind the stock market rally, and the expectation of interest rate cuts may continue to push the market up until next year, the net inflow of retail funds into US stocks is expected to reach a historical high in 2025. Data from JPMorgan analysts shows that the cash inflow from retail investors into US stocks so far in 2025 has increased by 53% compared to the same period last year, and is 14% higher than the peak of $27 billion in retail trading in 2021. According to trading data from JPMorgan, retail trading accounts for 20-25% of total trading volume this year, reaching about 35% in April, a historical peak. Retail investors are buying quality stocks during market sell-offs, especially after buying in heavily in April following the global market turmoil caused by US President Trump's "Liberation Day" tariffs, pushing the S&P 500 to new highs. The benchmark index has risen by about 16% so far this year. "Retail investors will continue to exist, especially in 2026. They have made money this year, like to trade stocks, and have corresponding applications. We will continue to see them play a positive role," said Steven De Sanctis, small-cap strategist at Jefferies Financial Group Inc. In recent years, with the rise of low-cost, zero-commission brokers like Robinhood and Interactive Brokers Group, Inc. Class A, ordinary Americans have entered the market in a more easy and affordable way, and the level of retail participation in the stock market has steadily increased. This trend was widely watched in 2021, when many Americans, who were at home due to the COVID-19 pandemic, had ample cash on hand and bet on various assets such as GameStop Corp. Class A and large tech stocks through mobile trading platforms. According to retail brokerage data and executives, AI concept stocks like NVIDIA Corporation (NVDA.US) and Palantir Technologies (PLTR.US) are the most favored targets this year, with the latter buying in low when institutional investors exit due to valuation concerns, resulting in a stock price increase of more than double. Another favorite of retail investors, Tesla, Inc. stock reached a record high on December 17, the first time since the end of 2024. "The two most active stocks on our platform are usually NVIDIA Corporation and Tesla, Inc. (TSLA.US). This is just two examples of retail investors controlling the market narrative and in many cases forcing institutional investors to follow," said Steve Sosnick, Chief Strategist at Interactive Brokers Group, Inc. Class A. As investors' strategies become more "thematic," quantum computing companies, uranium miners, metal miners, and rare earth companies have also attracted a lot of retail attention. Retail investors are increasingly favoring ETFs Senior executives of major trading platforms said a key feature of retail trading in 2025 is the increasing preference for Exchange-Traded Funds (ETFs) that track stock indices, cryptocurrencies, and commodities. "Investors continue to be attracted to ETFs. They trade all day, are tax-efficient, and transparent," said Bryan Lake, Co-Head of Third-Party Wealth Management at Goldman Sachs Group, Inc. Brett Kenwell, US Investment Analyst at eToro, pointed out that Direxion's Daily Semiconductor Bull 3X and Bear 3X ETFs are among the top five ETF products in terms of US dollar trading volume on the platform. Joe Mazola, Trading & Derivatives Head at Charles Schwab Corp, said that retail traders' trading decisions are now more rational, with fewer instances of "meme stock mania" and shorter durations. He added, "Retail investors are more attuned to market dynamics this year." Potential interest rate cuts are seen as a key catalyst Analysts and brokerages believe that potential interest rate cuts by the Federal Reserve are expected to continue to boost the market next year, maintaining the momentum of retail investment in 2026. Market volatility may trigger market corrections, attracting retail investors willing to bet on rebounds, but recent signs show that retail enthusiasm for such opportunities is not as strong as before. Last week, it was reported that Nasdaq is planning to submit a filing to the Securities and Exchange Commission to introduce 24-hour stock trading. Analysts believe that this move may further accelerate the momentum of retail trading. "We are in a 'golden age' of retail investment, with better access to knowledge, market entry, and advanced trading platforms," said David Russell, Global Market Strategist at TradeStation. However, due to lingering concerns about AI concept stocks dominating the market this year, analysts expect that the scale of retail fund inflows next year will not exceed the record in 2025, as investors may consider diversifying their portfolios. Kenwell of eToro said that financial, communication, non-essential consumer goods, energy, mining, and gold mining ETFs may perform well. "But ultimately, retail investors love tech stocks, which is the area they will continue to focus on in 2026, especially if we see any market volatility."