Retail Power Surges on Wall Street

Retail Traders Are Behind This Market Rally, Strategists Warn

This week’s market action offers something for everyone — earnings data for fundamentals-focused investors, and soaring gains in beaten-down names for risk-seeking traders. But beneath the surface, strategists say one group is firmly in control: retail investors.

Barclays strategists led by Venu Krishna cite their Equity Euphoria Index, a proprietary gauge that tracks the share of stocks in “euphoric territory.” The index is surging toward its highest level of the year, driven by options activity — particularly the zero-day-to-expiration contracts popular with retail traders.

This pattern of rising prices and heightened volatility, they say, is a hallmark of “upside chasing.”

Charles Schwab’s chief investment strategist Liz Ann Sonders agrees. Since the April 9 “Liberation Day” tariff low, the market’s biggest winners have been unprofitable tech names and heavily shorted stocks — exactly where retail investors are most active.

Speaking on the Excess Returns podcast, she said these flows have forced institutional investors to reposition, but not fully commit to risk. That, she suggested, leaves room for further upside — the so-called “pain trade.”

JPMorgan analysts, led by Nikolaos Panigirtzoglou, note that corporate buybacks are also providing support, even as uncertainties linger over tariffs and economic policy.

At the same time, more stable GDP and inflation data have reduced volatility, prompting volatility-control funds to raise their stock exposure from 20% earlier this year to about 55%, with potential to reach 70% if conditions remain calm.

Still, Sonders cautions the challenge now isn’t simply uncertainty but instability — constant policy shifts that make it difficult for companies to plan. Outside of AI-related spending, corporate investment and hiring remain largely frozen, she added.