Goldman Sachs stated that in recent months, retail investors have significantly reduced their stock trading, but overall U.S. household demand for equities remains robust enough to help support the market amid rising sell-off pressure and increased stock supply.
Zhitong Finance APP learned that Goldman Sachs stated that retail investors have significantly reduced their stock trading in recent months, but overall U.S. household demand for stocks remains robust enough to support the market amid rising sell-off pressure and increased stock supply.
In a research report on October 23, Goldman Sachs strategist Ben Snider noted that retail trading volume has declined by 20% since the summer and by 45% since late 2025. Individual investors have recently accounted for about 9% of total U.S. stock trading volume, down from 15% at the end of last year and near their lowest level since 2020. Meanwhile, after a turbulent week for hedge funds' top holdings, hedge funds have reduced their market exposure. Goldman Sachs reported that its hedge fund long-short portfolio fell 4.2% on Thursday, marking one of the largest single-day declines in the past decade; overall hedge fund leverage has also dropped sharply, though it remains above the 90th percentile of its five-year historical range.
This divergence—"speculative activity cooling while household investment demand remains strong"—is highly significant for the stock market. Households are the largest holders of U.S. equities, and their willingness to invest is a key source of support for stock prices. Goldman Sachs projects that by 2027, net supply of publicly traded U.S. stocks will see its largest increase since 2000, making continued household buying all the more crucial.
Goldman Sachs attributes the slowdown in retail stock trading partly to weak consumer confidence, rising energy prices, and household financial pressures. The bank's economists project that inflation-adjusted personal income will grow by only 1% in 2026; consumer spending remains resilient, in part because households have drawn down their savings, with the personal saving rate now down to around 4.1%. Retail investors have also expanded their activities into speculative markets such as leveraged ETFs, stock options, and prediction markets. In September, monthly trading volume in prediction markets reached $78 billion, compared with $5 billion a year earlier; over the past year, retail options trading has nearly doubled. However, Snyder notes that growth in these alternative markets remains relatively small compared to overall retail stock trading, and the decline in stock-trading activity appears more closely linked to deteriorating consumer sentiment and shrinking savings. Goldman Sachs' metrics tracking speculative trading in penny stocks, loss-making companies, and overvalued equities have also retreated from recent peaks, but they still sit at the 80th percentile of their historical range since 1995, indicating that while speculative activity has cooled somewhat, it remains elevated.
In contrast to the decline in short-term trading, households have been making substantial purchases through brokerage accounts, mutual funds, and retirement plans. Citing Federal Reserve data, Goldman Sachs reports that U.S. households bought $840 billion worth of domestic equities in the first half of 2026; this year, U.S. equity mutual funds and ETFs have seen net inflows of approximately $350 billion. Households directly hold 42% of the U.S. corporate equity market, and when indirect holdings via investment funds and retirement accounts are included, they control a majority stake. Goldman Sachs estimates that households hold roughly $65 trillion in equity assets, comprising $41 trillion in direct holdings, $10 trillion in mutual funds, $10 trillion in retirement accounts, and $5 trillion in ETFs. By comparison, self-directed brokerage accounts hold about $12 trillion in equity assets, accounting for only 18% of household equity exposure. Equity holdings are also highly concentrated among affluent households: the top 10% of households own 87% of household equity assets, with the top 1% accounting for 47%. This concentration suggests that investment decisions by wealthy households could exert a disproportionately large influence on equity demand. Goldman Sachs notes that the wealth generated by major public listings in recent months may have bolstered purchasing by affluent investors.
Meanwhile, corporations are shifting from net buyers of shares to net issuers. Citing Federal Reserve data, the report notes that in the first half of 2026, U.S.-listed and private companies combined will issue a net $175 billion in equity. Goldman Sachs projects that next year, the net supply of publicly traded U.S. equities will post its largest increase since 2000, including shares becoming available for sale after insiders' lock-up periods expire. The firm assumes that household demand will remain robust in 2027, supported by a relatively stable labor market and a modest decline in interest rates. Falling cash and bond yields typically make stocks more attractive, while rising household wealth and improving employment conditions have historically encouraged greater equity investment. Snyder also points to a long-term shift in how households hold assets through retirement accounts: 401(k) plan assets now account for 21% of the U.S. retirement market, up from 13% in 1995; stock allocations within these plans have increased, particularly among younger participants. Household equity holdings now comprise 55% of financial assets, a record high, reflecting strong demand and rising stock prices. Goldman Sachs cautions that changes in interest rates and potential economic disruptions brought on by artificial intelligence could influence household investment behavior.
Despite recent market volatility, Goldman Sachs maintains its bullish outlook on U.S. stocks. The firm expects$S&P 500 Index (.SPX.US)$By the end of 2026, it will reach 8,000 points, and within the next 12 months, it is expected to hit 8,700 points—up roughly 4% and 14%, respectively, from the 7,663 points used in the report. Goldman Sachs forecasts S&P 500 earnings per share at $375 in 2026, $415 in 2027, and $460 in 2028. This outlook underscores the importance of household demand as a key source of market support: even as speculative retail trading cools, long-term investors continue to pour substantial capital into equities. Whether this demand can endure will largely hinge on employment, household wealth, and interest rates—particularly as companies prepare to issue more shares to the market.
Editor/Joe