The return of retail investors is emerging as a potential driver for a new round of gains in the U.S. stock market. JPMorgan strategists anticipate a strong rebound in retail trading activity in the second quarter, following its decline to a four-year low in Q1, potentially injecting fresh momentum into the broader market.

In a recent report, JPMorgan's strategy team noted that retail investors' share of U.S. stock trading fell further to 17% in the first quarter but is expected to rebound in Q2, mirroring a pattern seen in the second quarter of 2025. Concurrently, the options market has already signaled a shift—call option purchases by small options traders, which had been contracting from October 2025 through March 2026, saw a sharp increase in April and May of this year.

This trend holds significant implications for the market. The S&P 500 exhibited highly similar patterns in 2025 and 2026—subdued returns in the first quarter followed by a strong rebound in the second. The latter half of 2025 ultimately delivered substantial returns for U.S. investors. If retail trading activity recovers as anticipated, it could provide additional upward momentum for the current market.

**Retail Participation Hits Four-Year Low, Options Market Shows Early Recovery**

Led by strategist Nikolaos Panigirtzoglou, the JPMorgan team highlighted that retail investors' share of U.S. stock trading dropped to 17% in Q1, the lowest level in nearly four years.

Nevertheless, the team emphasized that even during the downturn from the second half of 2025 through Q1 2026, retail investors still accounted for nearly 20% of U.S. stock trading volume and approximately 50% of zero-day-to-expiration (0DTE) options volume, remaining a force the market cannot ignore.

Recent movements in the options market are viewed as a leading indicator of recovering retail sentiment. After about six months of subdued activity, call option purchases by small options traders surged significantly in April and May this year, closely aligning with signals seen before retail investors actively re-entered the market in Q2 2025.

**Individual Stock Trading Enthusiasm Cools, Fund-Focused Retail Investors Provide Stable Support**

JPMorgan strategists also pointed out that retail activity in individual stock trading has noticeably slowed. In Q2 2025, retail investors actively participated in buying and selling individual stocks, significantly contributing to the market's rise at that time. However, enthusiasm for individual stock trading gradually waned thereafter, with only a brief resurgence in October 2025.

Simultaneously, another, more traditional segment of retail investors—long-term investors who prefer stock funds—has consistently provided stable support to the market during this period. The JPMorgan team stressed that for the stock market, a more critical metric is not the frequency of retail trading in stocks or options, but rather retail investors' share of overall end-investor fund flows.

**Historical Patterns Show Striking Similarity, Strong Q2 Performance Anticipated**

JPMorgan strategists specifically highlighted the remarkable similarity in the S&P 500's performance between 2025 and 2026: both years featured lackluster returns in the first quarter followed by a powerful rebound in the second. The full year 2025 ultimately delivered considerable returns for U.S. investors.

The team believes that if retail trading activity recovers as expected in the second quarter, it will align with this historical pattern, providing additional upward drive for the market. The re-entry of retail investors could become one of the key variables determining whether the U.S. stock market's positive momentum continues into Q2.