Retail Traders vs. Old-School Wall Street: How COVID-19 Changed the Stock

A Post-COVID Market Revolution

The stock market that emerged from the COVID-19 crash is almost unrecognizable to pre-2020 observers. A new army of retail traders – flush with stimulus cash, free trading apps, and perhaps a bit of boredom – stormed the gates of Wall Street. These everyday investors have
dramatically increased their presence in U.S. equities, accounting for roughly 20% of daily trading volume in recent years (peaking around 23% at times), about double their share from a decade ago. Millions of new brokerage accounts were opened during 2020’s lockdowns as mom-and-pop investors fell back in love with stocks. Armed with Reddit forums and zero-commission platforms, they’ve upended old market patterns with a near-religious “buy the dip” mentality – much to the befuddlement of traditional Wall Street analysts.

Rise of the Retail Trader

It’s hard to overstate how dramatically retail participation surged after March 2020. With people stuck at home and sports gambling on pause, trading stocks became the new national pastime. By mid-2020, Citadel Securities estimated retail investors made up about one-fifth of stock-market trading (and as much as one-quarter on the most frenzied days). This was a huge jump from prior years and it hasn’t gone away – in 2023 retail trading still hovered around 20% of U.S. equity volume, up from roughly 10% in 2013. In other words, the “little guys” now punch way above their weight in daily market activity.

Several factors fueled this retail boom. Commission-free trading (pioneered by apps like Robinhood) slashed barriers to entry. Social media and online communities (Reddit’sr/WallStreetBets, Twitter/X, TikTok) enabled small traders to swap tips and coordinate moves at
lightning speed. And of course, a roaring post-crash rally in 2020 enticed new investors with the allure of quick profits. As one observer quipped, the conditions created “the rise of the retail trader” in 2020 – everyone from college kids to grandparents piling into stocks. This democratization of markets has been a double-edged sword: it empowered individuals like never before, but many jumped in with minimal experience. (As one study wryly noted, the average retail investor spends only minutes researching a trade – yet still collectively drives a 20% share of volume and multi-billion dollar buying sprees)

Buy the Dip: How Retail Made Corrections Short-Lived

Perhaps the most profound change is how quickly the market now bounces back from downturns, thanks in large part to retail dip-buying. The mantra of this era might as well be:
“Stocks only go up – so buy every dip!” Every time stocks stumble, an online swarm seems ready to pounce. This dip-buying frenzy has provided what analysts call an “unprecedented cushion” for the market. Instead of panicking, retail traders treat pullbacks as flash sales. The result? Corrections that once lasted months now often vanish within days.

Consider a few examples. In early April 2025, the S&P 500 fell ~5% over two consecutive days– a significant slide by any measure. But rather than snowballing into a deeper correction, the drop was met by record retail buying that helped halt the decline almost immediately.
Again in mid-2025, after a U.S. credit rating downgrade spooked the market, retail investors piled in at their fastest rate ever, snapping up $4.1 billion in stocks within the first three hours of trading. One broker reported its retail clients’ buy orders surged 78% during that pullback compared to the prior week. In plain English: whenever the market shows weakness, legions of regular folks now rush to “buy the dip,” often providing enough demand to quickly stabilize prices..

Wall Street veterans have noticed this pattern with a mix of awe and dread. “All historical trends have ceased to be effective,” remarked one strategist, noting that a decline which before COVID might have led to a prolonged slump now gets almost immediately reversed by retail buying. Historically, a 5-10% correction might herald weeks or months of caution. Not anymore – in this post-pandemic market, dips are brief and “V-shaped.” Even the massive COVID crash itself proved astonishingly short: the 2020 bear market bottomed out after only 33 days, the quickest ever, and stocks roared back to their prior highs in record time. While government stimulus and Fed interventions played a huge role in that rebound, the newly emboldened retail crowd also contributed by aggressively bargain-hunting in the wreckage.

Wall Street’s “mysterious force” (as some have dubbed the retail herd) has effectively put a floor under many sell-offs. This makes life tricky for institutional players accustomed to more orderly declines. Short-sellers, for instance, now have to think twice – any attempt to bet against stocks can be torpedoed by a sudden Reddit-fueled buying frenzy that sends the stock to the
moon. In the short term, retail dip-buying has arguably become a stabilizing force, buffering the market against free-falls. Of course, it can also add volatility on the way up, creating mini-bubbles in the process. But from the perspective of 2020-2023, every correction has indeed been much shorter-lived than the gloomier forecasts of old-school analysts would have suggested.

Old-School Analysts vs. New-School Momentum

Not everyone is celebrating this retail-driven market resilience. Many Wall Street analysts and veteran investors are frankly puzzled – even exasperated – by a market that seems to
defy gravity and fundamental logic. These old school pros have long preached the gospel of valuations: stock prices should ultimately reflect earnings, cash flows, and economic reality. By those measures, the post-COVID rally (especially in tech and “meme” stocks) often looked like irrational exuberance. Traditional analysts warned that valuations were too high, that a reckoning was due. Warren Buffett himself – the high priest of value investing – spent the past few years raising a mountain of cash rather than chasing pricey stocks. Berkshire Hathaway’s cash hoard nearly doubled to $334 billion in 2024 as Buffett “balked at lofty valuations” and refused to “pay top dollar” in a “red-hot market”. By the end of last quarter, Berkshire’s cash pile was almost $350 billion, more than double what it was five years ago – a clear sign that Buffett and Co. saw few bargains in an arguably overvalued market.

Warren Buffett, seen at Berkshire’s 2024 shareholder meeting, took an increasingly cautious stance – amassing a record cash pile of well over $300 billion rather than chasing the
post-COVID market rally. Many traditionalists like Buffett have been preaching caution on valuations, even as stocks surged.

Yet, so far, the retail bulls have often proven the cautious analysts wrong (or at least delayed their vindication). Stocks that “shouldn’t” be so high by conventional metrics just keep climbing, powered by story-driven hype and dip-buying zeal. A strategist at LPL Financial
observed that today’s retail investors are “momentum-sensitive, focused on themes, and indifferent to high valuations”. Indifferent to high valuations! To an old-school analyst, that phrase is sacrilege – but it perfectly encapsulates the new mentality. Many younger traders have “only known bull markets” in their adult lives and firmly believe every dip will be followed by a rip to new highs. For them, buying the dip isn’t reckless speculation; it’s a proven strategy that has always paid off in the end (at least in the extraordinary post-2009 era, and especially post-2020).

It’s gotten to the point where seasoned Wall Streeters are being forced to adapt. “You should not go against retail investors now,” advises one chief market strategist, admitting that the usual playbook has been turned on its head. “Wall Street should not bet against them,” he cautions,
after watching institutions repeatedly get wrong-footed by retail’s relentless dip-buying. He noted
with some bewilderment how in past downturns (think pre-pandemic), weak economic news or poor earnings would trigger a sell-off that could last for weeks or months. But now, institutional sellers blink and – bam! – retail buyers swoop in, completely baffling the pros. One Friday in 2024, bad news triggered a “typical” institutional sell-off… which was almost entirely erased by Monday as retail traders flooded back in. The old guard is left scratching their heads, muttering that “historical trends are no longer working”.

So we have a delicious irony: the so-called “dumb money” (retail) has in many ways outsmarted the “smart money” in the short run. Those clinging to strict valuation logic –
Buffett raising cash, hedge funds shorting high-flyers, equity strategists predicting a big correction – have often been steamrolled by an influx of small traders buying anything that dips. It’s as if valuations are so last century, and “fundamentals schmundamentals” is the new motto. This is not to say fundamentals won’t matter eventually (gravity does exist, even if Wile E. Coyote can run off the cliff for a while before looking down). But as of 2023-2025, the market’s behavior suggests that momentum and sentiment – turbocharged by retail investors – can dominate for surprisingly long stretches, confounding anyone still using the old textbooks.

Meme Players: When Retail Mania Trumped Fundamentals

Nothing highlights this new retail-driven reality better than the meme stock phenomenon that exploded in early 2021. In a spectacle that will go down in financial history (somewhere between comedy and horror, depending on who you ask), thousands of small traders coordinated on
social media to catapult certain “stonks” to absurd heights – completely decoupled from any fundamental value. The poster child was GameStop (GME), a struggling video-game retailer that suddenly became the target of a massive short squeeze orchestrated by retail investors on Reddit. GameStop’s stock rocketed from under $20 to well over $300 in mere days, at one point soaring 400% in a single week. Hedge funds who had bet against the stock were forced to cover at huge losses, as a motley crew of retail traders collectively shouted
“BUY!” and turned the tables on Wall Street. It was a David vs. Goliath saga: David found a bunch of friends on Reddit and Goliath got squeezed.

AMC Entertainment – an indebted movie theater chain nearly left for dead during the pandemic
– saw a similar meteoric rise. In January 2021, AMC’s stock jumped over 200% in one wild
week as retail fans rallied behind it (in part for nostalgic reasons and in part simply because it
had a high short interest, making it a prime squeeze candidate). The “AMC Army” sent the
stock to levels that had no justification in earnings, but it didn’t matter – for a while, story and
sentiment trumped math. In fact, AMC was able to capitalize on its inflated share price by
issuing new shares to raise much-needed cash, raising substantial capital despite its
ongoing financial struggles. In other words, retail investors’ speculative frenzy literally
saved a company from bankruptcy – an outcome that traditional valuation models would
never predict!

 

These meme stock episodes perfectly encapsulate how retail traders changed market
dynamics. Coordinating on forums and fueled by a mix of irony and anger at “the system,” they
demonstrated an ability to move prices that Wall Street had rarely seen from individuals.
GameStop’s surreal spike forced seasoned short-sellers to unwind positions, and its stock
became unglued from reality (with 34 separate days of 5%+ price swings in the year that
followed). It eventually came back to earth – gravity can’t be suspended forever – and many
late-to-the-party retail buyers got hurt when the bubble burst. (For instance, those who chased
AMC near its peak have seen the stock drop ~42% over the past year, a painful reminder that
fundamentals can reassert themselves.) But the impact of these events was undeniable. Wall
Street analysts were left dumbfounded as companies on the verge of bankruptcy suddenly
had sky-high stock valuations thanks to Internet-fueled enthusiasm. The meme stock
craze forced analysts and fund managers to acknowledge that “non-fundamental” factors – like
a subreddit’s mood or a YouTuber’s rallying cry – could temporarily overwhelm traditional
valuation metrics. In short, the inmates were, if not running the asylum, at least throwing
one heck of a raucous party in the courtyard, and the guards had to adapt.

 

A New Market Paradigm – For Now, at Least

The post-COVID stock market has thus been a clash of old-school wisdom versus
new-school swagger. On one side, you have the Wall Street traditionalists: cautious analysts
and money managers warning that prices are too high and that this retail-driven frenzy can’t
last. On the other, you have millions of retail traders raised on a decade-plus of easy
money and rising charts, who treat every dip as an opportunity and mock the doomsayers
with memes like “Stocks only go up!”. The data clearly shows their impact – retail trading
volumes hitting records, corrections becoming shallower and shorter, and entire stocks
periodically being bid up to stratospheric levels on hype alone. Many “old school” experts
simply haven’t caught up with this reality. They continue to issue grave warnings about
valuation risks and market corrections, only to watch the retail crowd render those corrections
fleeting by rushing back in.

To be fair, those veteran analysts aren’t wrong to be concerned – eventually, fundamentals
are likely to matter again, and the buy-the-dip party will face a real test if economic
conditions worsen or if rising interest rates remove some of the easy money punch bowl. Even
the boldest retail trader would do well to remember that trees don’t grow to the sky. But the
key point is that since the pandemic, the market’s behavior has fundamentally changed.
Warren Buffett hoarding cash for years while Reddit traders send meme stocks to the
moon – that juxtaposition tells you everything about this new era. Buffett’s caution may
ultimately prove wise (he’s seen a bubble or two in his day), but in the meantime the retail
traders have been having a profitable party, and making Wall Street’s finest look a bit
outdated. One strategist noted that institutions have become “very cautious about shorting” now,
simply because of retail investors’ habitual dip-buying and momentum plays. In other words, the
pros have had to adjust to the new market mood music.

So, where does it all end? It’s impossible to say – maybe this is a permanent shift toward a
market dominated by democratized finance, or maybe the retail phenomenon will shrink if
and when a prolonged bear market teaches a harsh lesson. For now, though, the retail trader
remains a force to be reckoned with, and many Wall Street old-timers are left shaking their
heads in disbelief. The next time an analyst on TV insists that a stock is wildly overvalued based
on fundamentals, don’t be surprised if a chorus of retail investors shouts back: “VALUATIONS?
OK boomer… we’re buying the dip

TL:DR : The Market Has Changed — Many Old School Wall Street Have Not

Since COVID, the U.S. stock market has undergone a structural revolution. Retail traders —
armed with apps, information, and attitude — have permanently altered how the tape moves.
Corrections that used to take months now disappear in days. Analysts still clinging to their
“valuation frameworks” look like they’re analyzing a typewriter in the age of AI.

The irony? The same people who dismissed the retail crowd as “dumb money” have been
repeatedly outplayed by that very crowd post covid. The old guard is still preaching patience
and fundamentals while the market dances to a beat set by sentiment, algorithms, and retail
flow. Warren Buffett a great old school investor is sitting on $350 billion in cash may be the most
famous example of smart money waiting for a storm that never seems to arrive.

And Here’s Here We Draw Our Own Line in the Sand.

We refuse to provide price targets — period.

Let’s be blunt: price targets are one of Wall Street’s longest-running jokes. They’re educated guesses (and that’s being charitable) used to sound authoritative on CNBC. You’ve heard the nonsense — “This stock will hit $50 by year-end!” — as if markets care about a round number uttered by someone reading a spreadsheet.

• The market sets prices, not analysts. Not us, not the pros, not even company fundamentals in the short term. The real world moves faster than any model. Technology, liquidity, and human emotion have rewritten how stocks behave — and pretending otherwise is delusional.
• Price targets are psychological traps. They give traders false anchors — you hold too long waiting for that magic number, or you sell too early because some analyst target was hit. Either way, it distorts judgment.
• They’re almost always wrong. Track analysts’ calls for a year and you’ll see the comedy. Most targets never land. The market humbles them all.
• They promote fear or complacency. Chasing or fearing target prices leads to emotional trading — the kind that empties portfolios. Real wealth isn’t built chasing arbitrary numbers; it’s built holding quality positions through cycles.

So, we don’t do price targets. We find great opportunities, we back our convictions, and we let the market decide when it’s done. If we change our minds, you’ll know. But we won’t insult you with pretend precision or tell you when to sell just because a chart hit a number.

Bottom line: Wall Street can keep its models, its price targets, and its “valuation discipline.” We’ll stick with reality — where retail traders, algorithms, and shifting psychology rule the day. The old-school analysts can keep yelling “fundamentals” into the void. The rest of us are busy watching how the actual market moves.