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Tracking the Market's Power Players By Hannah Erin Lang

This is Hannah Erin Lang filling in for Spencer Jakab. Stocks look set to give up some ground ahead of the long holiday weekend, a day after the Dow industrials and S&P 500 closed at fresh record highs. This morning investors get the July reading of the Federal Reserve's preferred measure of inflation, which analysts expect to be in line with June.

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Think of a period when individual investors ruled markets and reaped riches doing it. The meme-stock frenzy of 2021 might come to mind. But 2025 isn't far off.

It's been difficult to deny the growing power of the so-called "dumb money" this year. Individual investors now account for about a fifth of the options market, according to JP Morgan. They've brought back meme stocks, turbocharging shares like GoPro and Opendoor. They've bought every dip, effectively propping up stocks through April's tariff turmoil.

That's left plenty of Wall Street pros wondering what individual investors will do next and what that will mean for the market. The problem: It's difficult to say.

Understanding everyday investors is a bit like trying to make sense of the U.S. economy: a survey here, a dataset there, all assembled into a mosaic and filled in with anecdotal evidence. Plus, some gauges are limited in what they show.

Take the weekly survey released by the American Association of Individual Investors. It is a popular measure of investor sentiment that asks respondents if they expect stock prices to rise or fall in the next six months.

But the survey polls AAII members who voluntarily submit their response. Who are these folks? The average member is 70 years old, with an average portfolio size of $4.8 million. Most are retired. These aren't the traders posting MicroStrategy memes or scooping up Krispy Kreme shares.

That might explain why bearishness, as measured by the AAII survey, peaked the week of April 3 this year-the opening of the trade war-with 62% of respondents expecting stock prices to fall.

Yet individual investors poured $4.7 billion into the stock market at that time, according to JP Morgan analysts. That was a record, until retail traders went on a $4.8 billion buying spree about a week later.

Was that the more telling indicator? Maybe, but investors often mistakenly talk about flows within part of the market as if they are the market.

Meanwhile, it can be difficult to distinguish the trades of individual investors from those of institutions. Many individuals trade through retirement accounts, whose transactions don't register as retail trades. Others barely trade at all. So buys and sells of individuals who do trade in taxable accounts may reflect only a sliver of the individual-investing population.

Keeping an eye on everyday investors can help illuminate extreme moments: when euphoria has juiced assets to unsustainable heights or when widespread fear has created opportunity. And there's no denying that individual traders are playing a bigger role in today's market.

But trying to invest for the long term based on their behavior may be like chasing a will-o'-the-wisp.

Stocks I'm Watching

Affirm : The buy now, pay later company swung to a profit , surpassing expectations. Shares rose 15% before the bell.

Marvell Technology : The semiconductor company's earnings met expectations, but its forecasts for this quarter disappointed. Shares skidded 13% in premarket trading.

Gap : The clothes company expects tariffs to cost it between $150 million and $175 million this fiscal year, higher than previously forecast. Same-store sales rose slightly, while revenue met expectations. Shares slipped 1.8% before the bell.

Dell : The technology company raised its annual outlook , boosted by strong AI demand. Softer guidance for this quarter weighed on the stock, which fell about 6% premarket.

Petco Health & Wellness : The pet-products retailer swung to a profit last quarter and raised its annual earnings outlook . Shares jumped 19% ahead of the open.

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Sorry Europe, American Luxury Brands Are In

The best investment in the luxury goods industry over the last five years wasn't one of the usual suspects like Hermès. Instead, Coach-owner Tapestry is the surprise leader, with Ralph Lauren a runner up.

Not bad for brands that are sometimes considered the poor cousins to pricier and more established European luxury names. Coach and Ralph Lauren are growing in a difficult market partly by targeting young consumers. And European brands may have unwittingly helped their U.S. rivals by raising prices too quickly in recent years, leaving young and middle-class shoppers with few budget-friendly choices.

What I'm Reading Fed Governor Lisa Cook Sues to Stop Trump From Firing Her ( WSJ ) Alibaba Creates AI Chip to Help China Fill Nvidia Void. ( WSJ ) Higher Prices Are Coming for Household Staples ( WSJ ) Chinese Money Launderers Are Moving Billions Through U.S. Banks ( WSJ ) Why Investors Are Afraid Wall Street's 'Fear Index' May Be Too Low ( Barrons ) Beyond the Newsroom

WSJ | Buy Side: Stock up on outdoor gear and apparel with these quality deals from REI's Labor Day sale .

This Day in Markets History

On this day in 1885, Gottlieb Daimler registers his "Reitwagen" ("riding carriage") as German patent DRP No. 36423. With its wooden chassis and revolutionary gasoline-powered internal-combustion engine, the Reitwagen is the world's first motorcycle-and the first mechanized vehicle for personal transport.

About Me

Hannah Erin Lang is a Wall Street Journal markets reporter covering U.S. equities and investing.

The Markets A.M. newsletter prepares you for the trading day ahead, with insight into the companies and industries set to move markets. Send feedback to [markets.am@wsj.com], or reply to this email.

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This article is a text version of a Wall Street Journal newsletter published earlier today.

(END) Dow Jones Newswires

August 29, 2025 06:36 ET (10:36 GMT)

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