The US stock market broke all its trading records on October 8, 2025: according to SEC data, volume reached 6.26 million orders in that single session, making it the highest-volume trading day in history since data collection began in January 2012. In 2026, we could be on track to break that record (the US regulator only provides data through December 31, 2025), driven by the sharp spike in volatility brought about by the war between Iran and the United States, which has triggered severe periodic corrections. However, who is actually moving the equity markets? Have stock market dynamics changed? And, most importantly, how are active management firms adapting to this new reality?

“Twenty years ago, it was big asset managers who could engage in price discovery; they were the ones moving the market. But the market has changed a lot, and now it is retail investors and hedge funds setting the rules of the game, and we should admit it,” reflects Huseyin Turan, portfolio manager of the J Safra Sarasin Tech Disruptors fund at J. Safra Sarasin Sustainable Asset Management (JSS SAM). Various data sources confirm this manager’s impression.

According to Reuters data, retail investor flows into US equities reached record levels in 2025, topping $308 billion. This represents a 14% increase over the “meme stock” craze seen in 2021, when flows of $270 billion were recorded.

Citadel confirms the continuation of this trend in its first-half 2026 report on market structure and flows, noting that during May and June it recorded an average daily cash equity trading volume 65% higher than in 2025, and more than double the 2024 average: “Nine of the ten highest-activity trading days ever recorded on our platform took place in the last two months, including seven in the month of June alone.” In fact, they point out that June 12 registered the largest single-day net volume of retail investor purchases ever observed on the platform, exceeding the previous record by 50%. It is worth noting that Citadel is the number one market maker for retail investors in the US, executing approximately 35% of all retail orders.

One of the keys to this spectacular increase in trading relates to expanded access for retail investors who did not previously invest in the market; according to Citadel, 50% of lower-income US households—traditionally the least active investing segment—today hold more than $615 billion in stocks and mutual funds, an all-time high. Since 2010, participation in stocks and mutual funds among the bottom 50% of US households by purchasing power has grown by more than 570%, outstripping any other income group.

“Buy the Dip,” “Meme Stocks,” and “Dumb Money”

In late 2020, video game retailer GameStop was one of the most heavily shorted stocks on the US market. Everything changed following a post on a Reddit forum by a user arguing that the company was undervalued. Soon, other forum users began investing in GameStop, driven partly by this user’s thesis—US investor Keith Gill, known on the forum as @RoaringKitty or @DeepFuckingValue—but also guided by a mix of emotions, ranging from nostalgia for bygone days to defying Wall Street elites.

GameStop became the first documented meme stock in history: users began buying shares en masse, eventually triggering a short squeeze (hedge funds that had taken short positions were forced to unwind them and buy back shares to cover losses, driving the stock price up and triggering further short covers). As a result, the stock rose from trading at $1.50 per share to hitting highs of $81.25 in a matter of weeks.

Five years later, the company continues to trade at nearly 15 times above its lows and recently submitted a takeover bid for eBay that was rejected by the company. According to SEC filings, GameStop holds a 10% stake in eBay, suggesting this chapter is not yet closed.

GameStop is not the only example, though it remains the most iconic instance of these sharp speculative movements centered on individual stocks that suddenly capture all the headlines for a brief period. This behavior has also been labeled “dumb money” by various media outlets. Another high-profile case, which resulted in a regulatory probe, involved Elon Musk’s tweets recommending investments in the cryptocurrency Dogecoin.

For Hartwig Kos, Head of Multi Asset Allocation at Allianz Global Investors, the recent IPO of SpaceX was the latest major meme. In an interview with Funds Society, Kos explained that his team has started working on identifying “meme themes”: “You position yourself from a fundamental standpoint, but you must also keep in mind what the trending topics are in the market, because the weight of the retail investor is very significant today. Currently, it is a market largely dominated by ‘animal spirits,'” he detailed.

Kos and his team also track whether retail investors buy during steep downturns, a behavior termed “buy the dip.” Citadel’s report confirms that retail investors purchased nearly 3.5 times the average daily volume on days when the S&P 500 closed lower during the first half of 2026.

For Fabiana Fedeli, CIO of Equities, Multi-Asset, and Sustainability at M&G Investments, one of the major shifts in equities since COVID has been the rise in dispersion across stocks, sectors, and countries. She cited as an example that in 2025, the materials sector “was fantastic in Asian emerging markets and very mediocre across the rest of the world.”

During a media presentation at the firm’s London office, Fedeli stated: “Investors are becoming increasingly specific and idiosyncratic,” while noting that retail investor participation in markets has virtually doubled since 2019 and that today’s retail investors are far better informed than in the past thanks to broader access to diverse information sources, including social media.

The expert defended M&G’s active management approach based on fundamental analysis, though without ignoring these trends: thus, if one of the stocks they hold or have on their radar becomes a meme stock, the protocol is to review the fundamental thesis: “If we believe it is truly worth buying, we wait for that ‘meme’ trend to cause its price to plunge, and then we enter; or, if we hold that stock and the ‘meme’ trend is pushing it to levels we believe completely overvalue future earnings, then we sell it.” Fedeli emphasized that the firm does not seek to actively participate, because “narratives change too quickly.”

At JSS SAM, manager Huseyin Turan notes that, in the case of mega-cap stocks, retail investor speculation “is not going to move share prices all that much.” Turan, who identifies as an X user (formerly Twitter) and a reader of several blogs, explains regarding comments from such accounts: “We have learned many good things from some Substack bloggers, but we are very selective. I don’t believe they have the capacity to move share prices, but they can move the narrative or the debate surrounding a stock.”

The Role of Passive Management

However, attributing stock market dynamics simply to the more or less irrational behavior of retail investors means taking the part for the whole. Citadel’s own report speaks of 2026 as witnessing “the structural transformation of equity markets” and draws conclusions regarding the primary forces currently moving markets: “Concentration, passive investing, retail investor participation, leverage, and volatility are no longer independent trends. Together, they increasingly determine how capital flows, how prices are set, and how risk is transferred.”

Among this set of interconnected trends, the growing role of passive management is worth highlighting. According to ETFGI data compiled in its Global ETFs Industry Landscape Insights report, the global ETF sector reached a record $23.09 trillion in the first half of the year, with net inflows hitting an all-time high of $1.33 trillion.

From M&G, Fabiana Fedeli warns that this changing dynamic is in turn altering how institutional investors allocate capital: “We have a number of clients who have asked us to start moving some money from passive to active management in areas where we believe we can generate greater returns actively.” The expert offered the example that year to date, returns for the Magnificent Seven have ranged between 6% and 7%, whereas investing in the 300 largest constituents of the S&P 500 “would have yielded more than double.” “Forget index investing. Real alpha can be achieved through stock picking,” she asserted flatly.

Fedeli added that more sophisticated asset owners are also shifting their asset allocation, moving from a strategic asset allocation to what she described as a “total portfolio allocation”: while a traditional strategic allocation involves a series of asset blocks assigned different static weights, allocations in this new model are far more dynamic and unanchored from indexes, instead establishing absolute return targets tailored to investor needs. “It is a harder way to invest, but many of us are adapting gradually. Today’s reality is that we have moved away from passive investing and there is greater capacity to be more granular,” she concluded.

The Weight of the Momentum Factor

“We are in a momentum market: the more something rises, the more it tends to rise afterward. These markets are very lucrative because they capture major long-term trends, especially when leverage is involved… and we are currently at peak leverage levels,” says Víctor de la Morena, CIO of Amundi Iberia, clarifying that he was referring primarily to institutional money.

During an outlook presentation for the second half of the year in Madrid, De la Morena explained that this combination of momentum and leverage is helping investors multiply their gains during uptrends, “but it generates tremendous volatility, because when those trends break, the pullbacks are brutal.”

De la Morena warns that investors seem already “accustomed to this type of market” where large swings can occur—in fact, unprecedented levels of volatility are being recorded in the Nasdaq—yet this combination of momentum and leverage is creating “a great deal of distortion.”

Kriti Gupta, Global Investment Strategist at J.P. Morgan Private Banking, and Nick Roberts, portfolio manager, point out the obvious: today it is AI capturing all the momentum. “Investors are not only buying shares in companies adopting this technology, but are also capitalizing on scarcities related to its development. This includes GPUs, memory, networking equipment, power generation, grid infrastructure, cooling, transformers, copper, gas turbines, and data center capacity. This trend has come at the expense of enterprise software and commercial services.”

Both experts note that the outperformance of this winning group has been historic so far this year, pointing out that internal dispersion within the momentum factor is at its highest level since 1990: “While a basket of large-cap US non-AI stocks is up 3.5% this year, a basket tied to AI data centers has generated a 47% return. The benchmark MSCI USA Momentum Index has risen 43% since the S&P 500’s trough on March 30, representing a rally more than double that of the broader index,” they note.

The latest test for this dynamic lies in the IPOs announced for this year. SpaceX’s successful debut has already brought an extra influx of demand, although De la Morena points out that “since the year 2000, no entity had demanded so much money from the market.” The expert stressed the need to monitor these “market tests” very closely to determine “to what extent that appetite reflects tangible investment rather than speculation.”

Regarding the IPOs announced for after the summer—Anthropic and OpenAI—De la Morena concludes with this warning: “What lies ahead could be an avalanche of capital, and that money has to come from somewhere: either it exits other assets, or it comes from liquidity and savings… or credit is extended to fund it.”