Retail Trading Plunges 45% as US Households Keep Buying Equities

Purchasing $840 billion in domestic equities, US households became the main pillar of support for stocks in a turbulent market where retail trading volumes contracted by 45% and the Goldman Sachs hedge fund long-short basket fell by a daily 4.2%. A research report dated October 23, 2026, prepared by Goldman Sachs strategist Ben Snider, revealed that despite the short-term speculative pullback, broad-based household demand balanced market selling pressure and rising share supply.

Why did retail investors withdraw from the stock market?

Retail investor trading volumes have decreased by 20% since the summer months and by 45% since the end of 2025. The share of retail investors in total US equity trading volume fell from the 15% level at the end of last year to approximately 9%, nearing its lowest level since 2020. On the institutional side, hedge funds were also seen reducing market risk, and while gross leverage of the funds declined sharply, it remained, within its 5-year historical range, above the 90th

percentile. The slowdown in short-term equity trading was driven by weak consumer confidence, high energy prices, and pressure on household budgets. While the institution's economists expect personal income adjusted for consumer price inflation (CPI) to grow by only 1% in 2026, the decline in the personal saving rate to approximately 4.1% indicated that consumer spending was financed out of savings.

Retail players also turned to leveraged exchange-traded funds, equity options, and prediction markets; monthly trading volume in prediction markets climbed from $5 billion a year earlier to $78 billion in September.

The retreat from short-term speculative trading formed a sharp contrast with long-term purchases made through brokerage accounts, mutual funds, and retirement plans. According to Federal Reserve (Fed) data, households purchased $840 billion of domestic equities in the first half of 2026; net inflows into US equity mutual funds and exchange-traded funds reached approximately $350 billion this year. Directly owning 42% of the US corporate equity market, total equity holdings in the hands of households reached approximately $65 trillion.

Of this total, $41 trillion consisted of directly held shares, $10 trillion of mutual funds, $10 trillion of retirement accounts, and $5 trillion of exchange-traded funds. Stock ownership remains concentrated in the high-income group; 87% of household equity holdings belong to the wealthiest 10%, and 47% belong to the wealthiest 1%.

How does household equity demand support the market?

As corporations shifted from net buyers to net issuers, household demand took on critical importance. US-based public and private companies conducted $175 billion of net share issuance in the first half of 2026. Goldman Sachs forecasts that with the expiration of insider lockups, the net supply of public shares in 2027 will see the largest increase recorded since 2000.

On the retirement side, while the share of assets in 401(k) plans in the US retirement market rose from 13% in 1995 to 21%, the equity share within households' financial assets reached an all-time high of 55%. Although potential changes in interest rates and the economic transformation that artificial intelligence may bring are listed among the risks, the institution forecasts that the S&P 500 index will reach 8,000 points at the end of 2026 and 8,700 points over the subsequent 12-month period.

This content is for information purposes only and does not constitute investment advice.