Goldman Sachs: Retail trading down 45% from late 2025, but household buying remains the "ballast" of U.S. stocks; maintains S&P 500 year-end bullish target at 8000 points

According to Zhitong Finance APP, Goldman Sachs stated that retail investors have significantly reduced stock trading in recent months, but overall demand for stocks from U.S. households remains strong enough to support the market amid rising selling pressure and increased stock supply.

Goldman Sachs strategist Ben Snider noted in a research report on October 23 that retail trading volume has fallen 20% since the summer, and is down 45% since the end of 2025. Recently, individual investors accounted for about 9% of total U.S. equity trading volume, compared to 15% at the end of last year, approaching the lowest level since 2020. Meanwhile, after a turbulent week for hedge fund crowded trades, hedge funds have reduced their market exposure. According to Goldman Sachs, their hedge fund long-short portfolio dropped 4.2% on Thursday, one of the largest single-day declines in the past decade; total hedge fund leverage also dropped significantly but remains above the 90th percentile of its five-year historical range.

This divergence—“cooling speculative activity but still strong household investment demand”—is significant for the stock market. Households are the largest owners of U.S. equities, and their investment willingness is a key support for stock prices. Goldman Sachs expects net supply of publicly traded U.S. stocks to see the biggest increase since 2000 by 2027, making ongoing household purchases especially important.

Goldman attributes the slowdown in retail stock trading in part to weak consumer confidence, rising energy prices, and financial pressure on households. The firm’s economists expect real, inflation-adjusted personal income to grow by only 1% by 2026; consumer spending remains resilient partly because households have reduced their savings, with the personal savings rate falling to about 4.1%. Retail investors have also shifted activity to speculative markets such as leveraged ETF, equity options, and prediction markets. In September, monthly trading volume on prediction markets reached $78 billion, up from $5 billion a year earlier; over the past year, retail options trading has nearly doubled. However, Snider stated that the growth of these alternative markets is still small relative to overall retail equity trading, and the decline in equity trading activity appears to be more closely related to deteriorating consumer sentiment and lower savings. Goldman’s speculative trading indices for penny stocks, loss-making companies, and high-valuation equities have also retreated from recent peaks, but remain in the 80th percentile of the range since 1995, indicating that while speculation has cooled, it remains elevated.

In contrast to the reduction in short-term trading, households have made substantial purchases through brokerage accounts, mutual funds, and retirement plans. Citing Federal Reserve data, Goldman Sachs notes that in the first half of 2026, U.S. households purchased $840 billion in domestic equities; so far this year, U.S. equity mutual funds and ETF have seen net inflows of about $350 billion. Households directly hold 42% of U.S. corporate equity market, and when including indirect holdings via investment funds and retirement accounts, they control the majority of shares. Goldman estimates that households hold roughly $65 trillion in equity assets, including $41 trillion in direct holdings, $10 trillion in mutual funds, $10 trillion in retirement accounts, and $5 trillion in ETF. By comparison, self-directed brokerage accounts hold about $12 trillion in equities, representing only 18% of household equity exposure. Equity holdings are highly concentrated among wealthy households: the richest 10% of families own 87% of household equity assets, with the top 1% accounting for 47%. This concentration means that the investment decisions of wealthy households may have an outsized impact on stock demand. Goldman notes that wealth created from recent large public offerings may have supported purchases by affluent investors in recent months.

Meanwhile, corporations are shifting from being net buyers to net issuers of equities. Citing Federal Reserve data, the report indicates that in the first half of 2026, listed and private U.S. companies together net issued $175 billion in stock. Goldman Sachs expects next year’s net supply of publicly traded U.S. equities to show the largest increase since 2000, including shares available for sale as insider lockups expire. The firm assumes that household demand will remain healthy in 2027, supported by a relatively stable labor market and a modest decline in interest rates. Falling yields on cash and bonds typically make equities more attractive, while rising household wealth and improved employment conditions have historically encouraged greater equity investment. Snider also points out a long-term shift in holding equities via retirement accounts: 401(k) plan assets now account for 21% of the U.S. retirement market, up from 13% in 1995; stock allocations in these plans have increased, especially among younger participants. Household equity allocation has reached 55% of their financial assets—a record high—reflecting strong demand and rising share prices. Goldman warns that changes in interest rates and economic disruptions brought about by artificial intelligence could impact household investment behavior.

Despite recent market volatility, Goldman Sachs maintains a bullish outlook on U.S. equities. The firm expects the S&P 500 index to reach 8,000 by the end of 2026, and 8,700 in the next 12 months, representing increases of about 4% and 14%, respectively, from the 7,663 level used in the report. Goldman expects S&P 500 earnings per share to hit $375 in 2026, $415 in 2027, and $460 in 2028. This outlook highlights the importance of household demand as a source of market support: as speculative retail trading cools, long-term investors are still pouring substantial capital into equities. Whether this demand can be sustained will depend largely on employment, household wealth, and interest rates—especially as corporations prepare to issue more stock to the market.