What do large swings in single stock prices, a declining Korean won, and underperforming short sellers have in common? They can all be blamed, at least in part, on retail investors.
In a recent interview, John Marshall, Head of Derivatives Research at Goldman Sachs Research, pointed out that retail investors are increasingly interested in single stocks, including single-stock options with a relatively short expiry, with activity increasing around earnings.
Asked whether these investments were exacerbating earning seasons volatility, Marshall suggested “a combination of that extra activity among the retail investors, particularly in options” as well as hedge fund activity.
Global reach
South Korean retail traders, who have a reputation for a “high-risk tolerance, herd behaviour and use of leverage”, have doubled their holdings of US equities, according to the Financial Times, driven in part by a resurgence in meme stock mania.
The paper points out that the won has fallen by almost 5% to the US dollar over the past three months, “with analysts pointing to Korean investors buying foreign assets as a major factor”.
Meanwhile, retail enthusiasm can spell a bad day at the office for short sellers, with retail investors not always following the expected market logic.
As J Capital Research co-founder Anne Stevenson-Yang told the FT, “retail investors are more likely to ride the wave, whether the wave is justified or not.”
A market force, not just customers
The sheer size of retail investment, and the unpredictable behaviour of amateur traders, means that retail investors aren’t just along for the ride anymore, they’re helping shape the market.
From swinging single-stock prices with options trades, nudging currency movements through overseas buying, and throwing a spanner in the short selling works, their influence is hard to ignore.
Are we all Redditors now?
As AI tools become more central to how professionals consume and act on information, the boundary between institutional insight and retail-driven noise is becoming harder to define. Lewis Z Liu, an AI entrepreneur, points to research showing that up to 40% of responses from tools like ChatGPT and Perplexity are sourced from Reddit, the same platform that helped fuel meme stock mania. While Liu isn’t suggesting that traders are blindly following Reddit threads, he warns that large language models tend to amplify consensus views.
All opinions, news, research, analysis, prices or other information is provided as general market commentary and not as investment advice and all potential results discussed are not guaranteed to be achieved. The information may have been derived from publicly available sources, company reports, personal research, or surveys. Past performance is not indicative of future performance. Trading carries risk of capital loss. Service available to professional clients only.
