Ten years ago, retail investor participation in the stock market was different. Barriers to entry for retail participants included per-trade commissions, less accessible technology, and limited information, which prevented most Americans from actively trading stocks.

In that world, conventional wisdom around politics and the stock market was different. Politicians were advised that drastic changes to the economy and stock market wouldn’t impact “regular Americans.” Retail participation was ~10% and most retail assets in the stock market were held by the top 1% of earners.

The no-fee retail trading revolution

Starting in the 2010s, retail market infrastructure changed. Robinhood launched its 100% fee-free, mobile-friendly beautiful trading app in early 2015, altering our view of retail investor participation. Instead of charging a commission per trade, it let users trade for free and monetized through interest on deposits, stock lending, and payment for order flow (PFOF). At the same time, Coinbase, launched in 2012 with a wallet to let users buy and sell bitcoin, used its 1M userbase to launch the first regulated US exchange. Suddenly, retail investors had accessible options to participate in the stock and crypto market.

Change happened fast. In 2015, when Robinhood launched, ~99.9% of retail trades had a $5 commission. By 2018, Robinhood’s commission-free trading platform had amassed 6M accounts, compared to Schwab and TD Ameritrade at 24M. In October 2019, Charles Schwab eliminated its $4.95 stock trading fee in a move that surprised everyone (except Robinhood), forcing E*Trade, Fidelity, and TD Ameritrade to follow suit, causing TD’s largest one-day stock decline since 1999. Within 3 months, Robinhood topped 10M accounts, Schwab acquired TD for $26B, and Morgan Stanley bought E*Trade ($13B, 5M accounts).

Of course, all this was prior to the pandemic.

Nothing like a global pandemic to drive retail stock participation

As pandemic-related lockdowns forced people to stay inside, retail stock market participation flourished. Robinhood’s AUM and accounts doubled to over 20M while Coinbase’s userbase doubled to 70M and monthly transacting users tripled. Retail market participation increased from 10% in 2019 to over 25% by mid 2020.

By the end of 2021, US digital brokerage accounts grew by 50% to ~90M. Over 60% of Americans owned stock or crypto directly or through their retirement accounts.

The post-pandemic stock market is a wake-up call for politicians

The situation is different than 10-15 years ago for the 30M new retail market participants and 31%+ of investors now allocating money to online discount brokerage platforms. Recent political turmoil is impacting that reality in a big way.

Regardless of your political stance, we should agree that the first 3 months of the new presidency and the last year of election madness have generated significant stock market volatility. Treasury Secretary Scott Bessent said this is normal. 

Believe it or not, I generally agree with Bessent that some market correction is normal, with one key modification that changes everything. I think experienced institutional participants perceive stock market corrections as normal. If you’ve been in the business for 35 years managing money at a global scale, market corrections are normal, resulting from periodic hype retrenchment to reality and vice versa over time.

But it’s not normal for the 30M+ new retail stock market participants that came online during and after the pandemic, and who have witnessed 150% growth in the S&P 500 since 2020 (24% annualized). It’s not normal for the greater population that started investing in the last 15 years during the era of ZIRP - Zero Interest Rate Policy when America experienced its longest bull markets in recent history and where every chart was, despite Bessent’s quips, quite literally “straight up”.

Given this, it’s no wonder that the recent stock market rout driven not by external macrofactors, wars, or outside economic policy but by one Twitter user calls “self-inflicted stupidity” is turning heads.

Despite a world of far too many “unprecedented actions,” the “tariff talk” and the sudden, massive (and likely incorrectly calculated) tariff announcement in what may in the future be sarcastically known as “Liberation From Money Day” have eviscerated stock market gains, causing outrage from Wall Street to Main Street.

The only way out is through (your legislator)

It’s interesting that we and the administration find ourselves in the same place. We didn’t realize the impact of the administration’s actions on retail stock portfolios and the extent to which the voting public cared.

At the same time, after recent unilateral actions, the degree to which anyone in America and beyond believes that Trump is willing and able to structure a broad domestic and international policy response to tariffs that benefits America is being reconsidered. It’s tempting to think the economy is going down bad and there’s nothing us retail investors can do.

But there is hope. Normally, the Trump Administration shouldn’t have the ability to enact tariffs - the “power of the purse” lies with Congress. Trump is using executive orders to drive tariff policy under the Emergency Economic Powers Act and the National Emergency Act, using the pretense of an “unusual and extraordinary threat” to take on this expanded role. While Congress has ceded some power over enacting tariffs to the president since 1913, that power is not absolute.

Congress has already taken action. On the same day that the new global reciprocal tariff policy (which ironically excluded North Korea and Russia from tariffs) was announced, Mitch McConnell, Susan Collins, Rand Paul and Lisa Murkowski put aside partisan politics and joined a group of Democratic senators to pass a measure blocking Trump’s tariffs on Canadian imports and preventing new tariffs without Congressional approval.

They need a 2/3 majority to override the almost certain presidential veto, but after the stock market events, I’m hopeful regular folks make it clear to their legislators what’s at stake and who should drive economic policy. Time will tell.