MW JPMorgan, Barclays and Schwab agree: Retail investors are in control of the market right now

By Steve Goldstein

Best-performing stocks have all the 'fingerprints' of being driven by retail investors, strategist says

There's something for every kind of investor this week - quarterly financials from the biggest companies giving fundamentally-minded investors mounds of data to sift through, or meteoric gains for out-of-favor laggards for the you-only-live-once options crowd.

But make no mistake, right now it's the retail investors that are in control. That's the conclusion from strategists across Wall Street.

Barclays strategists led by Venu Krishna have their own metric, something called the equity euphoria index, which measures the percentage of stocks in "euphoric territory" and is now surging toward the highest levels of the year. It's a proprietary measure culled from the options market, and could be more reflective of market conditions given the way retail investors now use zero-day-to-expiration and other aggressive derivative products. Strategists at the bank said the dynamic of individual stocks both increasing in price and in volatility is a "hallmark of upside chasing."

Liz Ann Sonders, chief investment strategist at Charles Schwab, agrees. Since the April 9 closing low following the introduction of "Liberation Day" tariffs, the best performers have been unprofitable tech stocks and heavily shorted stocks. She said on the Excess Returns podcast that those moves are evidence of "retail investor fingerprints." Retail investors have forced repositioning onto institutional investors, but not to "aggressively risk-on positions, which is why I think the pain trade may still be higher," she added.

JPMorgan analysts led by Nikolaos Panigirtzoglou say that retail investors, as well as corporate buybacks, are providing a backstop to markets. They say that, despite elevated uncertainty on tariffs and other elements of economic policy, actual economic data - GDP and inflation in particular - is becoming less volatile.

That in turn has helped to quash market volatilty. And that lessened volatility has led to more stock-market exposure from so-called volatility control funds, which adjust their asset allocation depending on how volatile markets are. According to Barclays, these funds are now allocating about 55% to stocks, versus as low as 20% earlier in the year, and their strategists say the vol-control funds could take their exposures up to 70% in a "benign scenario."

These funds, however, could also ratchet down their exposures, depending on how the upcoming Aug. 1 tariff deadline, the July 30 Federal Open Market Committee decision and earnings play out.

But Sonders said what characterizes the environment now is less about uncertainty and more about instability - companies not only do not know what is coming, but they have to grapple with continually shifting policies. That is what has frozen - outside of AI capital expenditure plans - corporate investment and hiring plans, she said.

The market

Dow futures (YM00) fell - largely tied to IBM results - while Nasdaq 100 (NQ00) futures were stronger. Crude-oil (CL00) futures edged higher. Treasury yields BX:TMUBMUSD10Y were stable.

   Key asset performance                                                Last       5d      1m     YTD     1y 
   S&P 500                                                              6358.91    1.52%   4.38%  8.11%   17.17% 
   Nasdaq Composite                                                     21,020.02  1.40%   5.24%  8.85%   21.21% 
   10-year Treasury                                                     4.403      -5.40   16.40  -17.30  15.60 
   Gold                                                                 3369.1     0.71%   0.82%  27.65%  42.55% 
   Oil                                                                  66.09      -0.33%  1.33%  -8.04%  -15.65% 
   Data: MarketWatch. Treasury yields change expressed in basis points 

The buzz

Google parent Alphabet (GOOGL) late Wednesday reported stronger-than-expected search revenue as it also lifted capital-expenditure plans.

Tesla results $(TSLA)$ were largely in line with forecasts as CEO Elon Musk said there could be challenging quarters to come.

Chipotle Mexican Grill $(CMG.AU)$ reported declining same-restaurant sales and cut its full-year outlook.

American Eagle Outfitters $(AEO.UK)$ stock was surging, one day after the company announced actress Sydney Sweeney will advertise its jeans.

President Donald Trump is scheduled to visit the Federal Reserve, an institution he's been criticizing lately on matters ranging from monetary policy to construction costs.

The European Central Bank is expected to pause its rate at 2% with the expectation that it will cut again later in the year.

Jobless claims is due for release, and shortly after the open, the "flash" readings of U.S. purchasing managers index as well as the latest new-home sales data.

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The chart

Would a Fed rate-cut campaign even lead long-term interest rates in the direction the White House wants? Historically, it's a coin flip. WisdomTree looked at the 10-year rate direction after the first Fed rate cut of 11 different cycles. "The reason is simple-yields aren't just set arbitrarily. They reflect underlying fundamentals like inflation expectations, economic growth prospects and government borrowing needs, all of which are captured in nominal GDP. If policy rates are cut too aggressively and fall out of sync with these fundamentals, markets may respond by pushing long-term yields up, not down," said Behnood Noei, director of fixed income.

Top tickers

Here were the most active stock-market tickers on MarketWatch as of 6 a.m. Eastern.

   Ticker  Security name 
   TSLA    Tesla 
   NVDA    Nvidia 
   GOOGL   Alphabet 
   OPEN    Opendoor Technologies 
   GME     GameStop 
   PLTR    Palantir Technologies 
   AMD     Advanced Micro Devices 
   NIO     Nio 
   IXHL    Incannex Healthcare 
   INFY    Infosys 

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-Steve Goldstein

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July 24, 2025 06:46 ET (10:46 GMT)

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