A fresh madness of retailers is reforming financial markets

Copyright © HT Digital Streams Limit all rights reserved. The Economist 3 Min Read 30 Jul 2025, 07:10 AM ist a new meme stock-frenzy driven by retail investors is aimed at Dork shares, amid broader speculative trading. (Getty Images via AFP) Summary blame apps and dorks, not stimmies investors like an acronym. In recent months, they have embraced the Taco (Trump Always Chickens Out) trading. They once swung across the Faang shares (Facebook, Apple, Amazon, Netflix and Google). During Europe’s sovereign debt crisis of the traders in the 2010s, the PIIGS (Portugal, Italy, Ireland, Greece and Spain) fired. A good memory for initials takes a financial historian a long way. The Dork shares are perhaps less well known. These include Krispy Kreme (Ticker: Dnut), Opendoor, Rocket Companies and Kohls. The firms-a bakery chain, real estate agent, mortgage provider and retailer-market valuations between $ 700 million and $ 32 billion. One thing that binds them is the lack of love shown by hedge funds, which bets aggressively against everyone. Another is the abundance of enthusiasm shown by retail investors, which takes up the shares in the hope of pushing the short sellers and raising the price. During July, the price of open ear only rose by more than 500% before falling back. A new meme-stock-frenzy has begun. This reflects the mania who sent the share prices of GameStop and AMC, a theater chain, four years ago. Then, like now, the furious trade had little to do with financial performance. Speculative activities were once blamed for the stimulus of government and low interest rates. But that story now seems less convincing. Perhaps the exuberance instead reflects changes in the investment technology available to retail investors. Today’s mania goes beyond meme shares. Research by analysts at Goldman Sachs, a bank, indicates that speculative trading (in penny stocks, unprofital firms and companies with the highest valuations) has climbed to levels seen twice before: during the previous boom that peaked in the late 1990s. Today’s trading remains far below the peaks, but far above what was previously considered normal. Other signs of zeal abound. Transactions in zero-day options, contracts that benefit by day traders that expire the same day have risen over the past few years. According to Cboe Global Markets, an exchange, a record 2.1 million changed hands in the second quarter of 2025, from 1.4 ma years earlier. The stock exchange estimates that retailers make up at least half of such trade. In 2020 and 2021, the combination of loose monetary and fiscal policies is often credited for the boom in speculation. Covid-era-stimulus checks (or ‘stimmies’) delivered cash directly to emerging retailers just as everyone was limited to their homes. Robin Greenwood, Toomas Laarits and Jeffrey strangle, three academics, tested the theory in 2023. Their study found that the advent of stimulus controls in both Hong Kong and America led to an abnormal boost in the price of shares that are popular with retail investors. This cannot be the explanation today. The last stimmies ended up on American Dene four years ago. Meanwhile, monetary policy has been tightened: The Balance Sheet of the Federal Reserve has shrunk and the 10 -year returns are more than 4%. Researchers at the San Francisco Federal Reserve reckon the saving of the pandemic era of the pandemic era was exhausted more than a year ago. But even without the help of stimulus money, retail investors with a zeal for speculation continue the markets. Such traders now make up about 20% of the total US trading volume. This is lower than 24% on the peak of 2021, but far above the 10-16% of the 2010s. The change was not driven by the government’s handouts, but by technology. App-based platforms have given individuals easy access to leverage, a wide range of securities and stock trading. It’s no surprise that the share price of Robinhood, among the largest of the new online brokers, has risen 172% this year. Investment is now appealing to a larger series of Americans. According to JPMorgan Chase, more of the bank’s customers transfer money to an investment account. The share of clients with a high revenue who does so has doubled between 2015 and 2023. For low-income customers, the share is fourfold. Apart from a larger amount of speculation, the long-term consequences of a more retail-heavy market are not yet clear. Some investors fear that it already has a negative effect. AQR founder Cliff Asness, a Quant Fund, believes it is perhaps the biggest contributor to falling market efficiency. “Technology, trading on your phone on 24/7, and especially social media is the biggest culprits,” Mr. Ashness wrote in 2024. The big test will come during the next serious downturn. When the S&P 500 swung earlier this year, falling more than 20%, retailers bought the dip, and a quick recovery followed. But according to historical standards, the drop was modest. Would the dork buyers and their brothers be so brave in a deeper slump, perhaps accompanied by a recession? Sooner or later, investors will find it out. Catch all the business news, market news, news reports and latest news updates on Live Mint. Download the Mint News app to get daily market updates. More Topics #Investors #Retail Investors #Speculative Trading Read Next Story