You Can Thank Everyday Investors for the Ongoing Bull Market

Retail investors have been driving the stock market higher in 2025, surprising Wall Street pros and confounding institutional investors. Despite heightened volatility caused by various factors such as tariff deadlines, geopolitical conflicts, weak macroeconomic data, and inflation concerns, average joes have consistently bought the dip, leading to significant market rebounds.

Historically, in bear markets, stocks return to their rightful owners as negative sentiment triggers fear-induced selloffs by retail investors. However, this year has seen a shift in this trend, with retail investors defying expectations and aggressively buying pullbacks. This behavior has left institutional investors on the sidelines, unable to fully comprehend the market dynamics.

One of the reasons for this shift could be the increase in the number of Americans owning stocks. According to Gallup, 62% of U.S. adults currently hold shares, up from 52% in 2016. This surge in retail investor activity was evident in April when $7.32 billion flowed into U.S. equities, leading to a dramatic V-shaped recovery in the market.

More recently, in late July, another sell-off triggered by a subpar jobs report and looming tariff deadlines saw retail investors once again stepping in to buy the dip and fueling another V-shaped recovery. This behavior has become a pattern, with retail investors instilling a sense of inevitability about market recoveries.

While retail investors have been instrumental in keeping the bull market afloat, concerns about stock valuations reaching unsustainable levels have started to surface. Data from VettaFi shows that market valuations are at their highest level in history, with the average significantly above its historical mean. This has raised questions about a possible market correction, especially for high-flying stocks like Palantir, which has seen a substantial increase in its price-to-earnings ratio.

Despite these concerns, retail investors continue to be rewarded for their bullishness, with the S&P 500 up nearly 29% since its year-to-date low in April. While elevated valuations may pose long-term risks, the current market environment remains favorable for retail investors who have shown resilience in the face of market volatility.

In conclusion, retail investors have played a crucial role in driving stocks higher in 2025, defying traditional market expectations and confounding institutional investors. While concerns about stock valuations linger, the bullish behavior of average joes has contributed to the ongoing bull market rally.