6 minBusiness
Retail Investors Now Drive Over 20% of U.S. Stock Trading as Speculation Becomes Identity
Ordinary investors account for more than a fifth of U.S. stock market activity, roughly double the level of a decade ago, as speculation increasingly functions as a form of personal and political identity. The SpaceX IPO, which made Elon Musk the world's first trillionaire despite the company's heavy cash burn, illustrates how sentiment can override financial fundamentals.
Ordinary retail investors now account for more than 20% of U.S. stock market activity, roughly double their share a decade ago, according to estimates from the investment bank Jefferies. That means individual traders are responsible for nearly as much trading volume as mutual funds, hedge funds, and banks combined, a shift that is reshaping how markets behave and what drives them.
The change is visible in the market's most dramatic episodes. When Elon Musk's SpaceX completed its initial public offering this summer, hundreds of thousands of people around the world bought in, even though the company's core rocket business is burning through enormous amounts of cash. The offering broke records and turned Musk into the world's first trillionaire. Financial metrics did not explain the demand. Sentiment did.
SpaceX is an extreme case, but it reflects two broader trends that have become difficult to ignore. Retail investors are a large and growing force in financial markets, and their feelings can often outweigh fundamentals. The phenomenon is global, but it is most pronounced in the United States, where ordinary people have embraced speculation both as a path to wealth and as an expression of personal belief.
The first trend is easy to measure. The second is harder to quantify, but the anecdotal evidence is accumulating. To the frustration of many traditional investors, the securities people choose have become an extension of who they are. That can mean the stock of a staid utility or a racy video game maker, a cryptocurrency, or a position in the emerging prediction markets. Finance has long shaped American life, but the relationship now appears distorted in a way that raises questions about identity, worth, and national character.
The roots of this conjoined identity and speculation can be traced back more than a century, to the bond-sale program that financed U.S. entry into the First World War. After the United States declared war on Germany in 1917, the task of funding the army, navy, and weapons fell to Treasury Secretary William McAdoo, President Woodrow Wilson's son-in-law. McAdoo was a former lawyer and streetcar executive, energetic and decisive, progressive in his business policies and regressive in his racial politics. He introduced segregation at the Treasury and was later endorsed by the Ku Klux Klan during an unsuccessful presidential run.
McAdoo understood that taxes alone could not cover the cost of the war. The problem was that the U.S. government bond market had shriveled to under $1 billion, most of it locked in bank vaults rather than traded. Most ordinary Americans did not know what a bond was. Wall Street bankers estimated there were only about 350,000 bondholders in a country of roughly 100 million people. They advised McAdoo to limit his first sale to $1 billion, target established investors, and offer an interest rate of at least 5%. Even that, they believed, was ambitious.
McAdoo rejected their pessimism. He named the securities «Liberty Loans» and built a sprawling War Loan Organization to market them to the public. The campaign was a stunning success. Billboards, exhibitions, leaflets, cake sales, workplace solicitations, and marches promoted the bonds across the country. When bankers struggled to reach the masses, celebrities such as Charlie Chaplin were enlisted to polish the pitch. Edward Bernays, often considered the father of modern public relations, orchestrated appeals to patriotism, sentiment, and personal political yearning to draw in investors who might have been deterred by the modest interest rates.
The push sometimes crossed into shaming. So-called «dollar slackers» faced naked intimidation from groups pressuring them to buy. The Atlantic condemned the practice as «borrowing with a club» and warned that «mob rule by the rich, with the able assistance of hoodlums» could stir support for socialists. Future President Warren Harding complained that the drives were «hysterical and unseemly.»
Yet the loans were genuinely popular. Buying them became a communal expression of belonging that crossed social, racial, and religious lines in a divided, polyglot nation. The War Loan Organization deliberately stoked competition among groups to see who could demonstrate the greatest fealty to America through the volume of their purchases. That competition mattered especially to many women and Black Americans, who hoped their efforts to support the war might advance their aspirations.
The result was a template that still shapes American investing: a financial act freighted with identity, belonging, and the promise of standing. A century later, that template has migrated from wartime bonds to meme stocks, cryptocurrencies, and record-breaking IPOs, with retail investors now a dominant force whose collective mood can move markets as much as any balance sheet.
