Retail trader engagement with the stock market has significantly decreased, according to Goldman Sachs strategist Ben Snider. Since mid-summer, retail trading volumes have dropped by approximately 20%, and more than 40% since late 2025. Currently, retail trading constitutes only 9% of total U.S. equity trading volume, down from 15% late last year, marking the lowest level since 2020.
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Snider attributes the reduction partly to weak consumer sentiment and high energy prices, though he points out that this is not the entire story. Notably, retail traders have increasingly turned to leveraged index ETFs, which have seen trading activity nearly double compared to non-leveraged ETFs tracking the same indexes.
Additionally, prediction markets are emerging as a popular alternative for retail traders. Trading volumes in prediction markets surged to $78 billion in September, up from $5 billion a year ago. Snider noted that while this increase reflects seasonal trends tied to sports and the upcoming U.S. elections, Robinhood's data indicates a steady rise in event contract trading over the past year, matched by almost a doubling of retail trading in options.
Despite the drop in retail trading, major stock indices have performed well this year. The S&P 500 and the Nasdaq Composite reported double-digit returns of roughly 12% to 13%, while the Dow Jones Industrial Average experienced a modest gain of around 9%. Market performance has been driven by strong corporate earnings and robust demand for technologies associated with artificial intelligence and cloud services.
Snider expressed confidence in the ongoing demand for equities, noting that households own 42% of the U.S. equity market and the wealthiest 10% control 87% of total household equity assets. He highlighted that households purchased $840 billion in U.S. equities in the first half of 2026, compensating for a decline in demand from corporations, with strong mutual fund and ETF flows evident in recent months.