Published August 15,2025
Long-time stock market watchers continue to be confounded by the market’s resilience. A good part of this underlying strength comes from the attitudes of today’s newest generation of investors. A recent article from the Wall Street Journal outlines the mindset of today’s young investors:
“You can’t keep everyday investors down for long, at least not in this market.
When markets swooned this spring in the face of tariff turmoil, individual investors jumped in to buy the dip. They helped propel a rebound in stocks to record levels and even resurrected meme trades.
For many Wall Street’s pros, this is yet another sign of froth at a time when stocks, especially the biggest tech names, are historically expensive. The meme-stock trades are rekindling memories of the dot-com boom.
But the resilience of individual investors may signal something more than just misplaced optimism. Their willingness to stick with stocks may be more enduring than many veterans realize. That, in turn, may help temper any eventual reversion to the mean for high-flying stocks.
Why would this be more than a passing trend? For one, there has been a generational change among investors. Fewer remember calamities such as the dot-com downturn or even the financial crisis.
Instead, the current crop of young investors have known mostly blue skies since they opened their first brokerage accounts. They came of age during a time of super-low interest rates when markets moved only higher over time.
Striking gold during their early investing years emboldened many to take bigger risks. And it encouraged them to hold on during moments of tumult.
The Federal Reserve’s rate increases in 2022 tested this tendency to buy the dip when the S&P 500 slid 19%, its worst loss since 2008. But many investors stuck around. U.S. stock mutual and exchange-traded funds, which are typically tapped by households in trying times, recorded $27 billion of net inflows that year, according to EPFR data.
They were quickly rewarded. The drop was followed by the best two years for the S&P 500 in a quarter-century.
More recently, markets tumbled at the start of August because of disappointing jobs data. But they quickly regained their footing. Likewise, when the S&P 500 dropped around 5% for two consecutive sessions after President Trump’s Liberation Day in April, individual investors bought record amounts, according to JPMorgan. U.S. equity and mutual funds recorded $31 billion of inflows the week ending April 9, which included the stomach-churning swings after Liberation Day, according to EPFR.
Unlike the younger cohort of investors, older millennials and generations prior navigated darker times and longer downturns. Those were tougher to stomach.
Take the financial crisis. Investors yanked almost $50 billion from U.S. equity funds in 2008 and continued pulling money for four consecutive years even after stocks bottomed in March 2009, according to EPFR data. Those who sold missed out on the beginning of the longest bull market since the S&P 500’s inception.
Meanwhile, after the dot-com bubble popped, the S&P 500 didn’t claim a new high for around seven years.
Today, those who have waded into the stock market, and stayed invested, have watched their portfolios swell. The S&P 500 has become a real-time barometer of many Americans’ rising wealth, outperforming other assets like houses or bonds. There were 537,000 401(k) millionaires at the brokerage Fidelity as of the end of 2024, a record.
And stocks are more intertwined with many Americans’ finances than ever. Stocks as a percentage of household financial assets surged to 36% in the first quarter, the highest level in records going back to the 1950s, according to Ed Clissold, chief U.S. strategist at Ned Davis Research.
“It emboldens people because they’ve been successful,” said Jim Paulsen, a veteran market watcher and former chief investment strategist at Leuthold Group. “You kind of start feeling like, ‘This is the deal, I can stomach pullbacks.”
This has occurred at a time of a wider societal shift: Trading and betting has morphed into entertainment for many Americans. Group chats pop with comments from friends on sports, hot stocks and memes. Everyone seems to know someone who made millions overnight in cryptocurrencies.
Changed attitudes toward gambling have coincided with tech advances that have made it easier, and cheaper, to trade a wide variety of assets. Some brokerages have sought to “gamify” investing, creating the look and feel of a casino within their apps. At the same time, they also offer high-octane trades on things such as options and prediction markets.
That has kept individual investors engaged. And they loom large in the market.
The share of total options activity that stems from these individual traders recently hovered around 20%, even higher than the peak during 2021’s meme mania, according to JPMorgan data. They made up around a fifth of trading volume in the stock market, slightly below the 2021 high but around double the figure in 2010, according to Jefferies.
Of course, every bull market ends. And the higher that valuations are at that point, the more jarring the fall can be.
But if there has been a meaningful change in investor psychology, there could be an underappreciated cushion that limits the damage. Today’s new, bullish investors might function like short sellers did previously, stepping in to buy when everyone else was selling.
Charles Schwab recently surveyed its customers and found that around 80% said they planned to buy if markets grew volatile in coming months.
The impulse to stay invested might be more powerful, and durable, than many in markets appreciate.”
Market Update
This week was all about interest rates as investors focus on whether the Federal Reserve will cut rates at their September meeting. Monday brought a -0.3% dip in stock indexes following a big gain the prior week. Semiconductor news was particularly active with Nvidia and AMD agreeing to share revenue with the federal government in an effort to buy favorable tariff treatment for their Chinese chip sales. Additionally, memory chip maker Micron raised its earnings outlook. Tuesday’s consumer price index report showed inflation largely unchanged fueling expectations for a Fed rate cut in September. Interest rates dipped on the report while growth stocks jumped +1.4% and interest rate-sensitive sectors, like housing, took flight. Stocks added +0.3% Wednesday as Treasury Secretary Bessent used the consumer price report to suggest the Fed make a 0.5% cut in September. The Trump Administration has made no secret of their desire for lower rates. The Fed has been cautious using the uncertainty around tariff impacts as their rationale for that concern. The Fed got support for that caution Thursday when the producer price report showed a strong inflationary rise. Taken together, the consumer and produce price reports showed prices rising but not hitting consumers. Either the consumer impact is yet to come. Or businesses are eating the rising input prices and suffering a bit of profit margin decline. The good news was that stocks digested the report with little change. Stocks ran in place Friday with economic news overshadowed by a summit meeting between Trump and Putin. Weakness in shares of semiconductor equipment maker Applied Materials on a weak report were offset at the index level by a surge in shares of health insurer United Healthcare. The health insurer has fallen -50% in a few months as the company’s Medicare Advantage program has hit profits and raised the ire of several members of Congress. Friday brought news that Warren Buffett’s Berkshire Hathaway has taken a stake in the beleaguered company. The stock is a large component of the Dow Industrials, which outperformed as a result of Friday’s pop upward.
Stocks added to their strong gains from the prior week. The S&P 500 rose +0.97% while the Nasdaq 100 (QQQ) pushed higher by +0.45%. Gains in homebuilders and finance companies sent lagging small cap indexes flying up +3.05%.
Warm wishes and until next week.