Big investors take control as retail traders retreat

Wall Street’s biggest investors are becoming more active as individual traders lose some of their influence over the stock market.

For years, retail investors accounted for a relatively small share of market trading. But the pandemic changed that, and by 2025, individual investors increased their activity. They saw market dips as buying opportunities, wagering that President Trump would retreat from the proposed policies.

However, that has changed again as large investors are coming back.

Goldman Sachs found that retail investors now account for more than three percentage points less of S&P 500 trading volume than the five-year average.

Data from Vanda Research show that institutional traders have stepped up their activity, with options flow running at three times its typical September level. They have also continued buying and selling stocks even as US Treasury yields have climbed sharply.

Over the past five sessions, institutional investors increased their market activity despite the 10-year and 30-year Treasury yields reaching their highest levels in more than a decade.

Why rising yields matter
Rising yields can make stocks less attractive because they increase borrowing costs and offer investors higher returns from relatively safer bonds.

Still, large investors are not abandoning risk. Instead, they are becoming more selective, with some focusing on artificial intelligence-related companies.

Meta Platforms is one example. Its shares gained nearly 13% over the week following the launch of its Muse Charm device. The company has also benefited from growing investor interest in its artificial intelligence products.

Meanwhile
The S&P 500 still gained more than 1% last week despite rising bond yields, showing that investors remain willing to buy stocks even as financial conditions tighten.