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The Wild Summer of 2020 Turned Small Investors Into Whales

Pros are wondering what the rally was really about

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There are a few jokes going around Wall Street to explain the wild ride for the U.S. stock market this summer: Why did the huge rally suddenly stall out on Sept. 2? Because all the phone-app day traders had to go back to school. Or maybe because the NFL season (and football betting) was approaching.

It’s no surprise that professional traders—hardly paragons of rationality—would point to ordinary investors when things get weird. But it’s true that there seems to have been more driving the Covid-era bounce than rate cuts and government stimulus. The rise of commission-free trading, the ease of fractional share ownership, and maybe the gloomy-giddy feeling that there’s nothing better to do fueled a new public fascination with the stock market. Retail traders now account for 20% of equity trading, up from 15% last year, according to an analysis by Larry Tabb of Bloomberg Intelligence.