Retail Trader Behavior Shifts in Leveraged ETF Usage Across Market Cycles

Leveraged exchange-traded funds (ETFs) and notes (ETNs) have become a primary tool for retail traders seeking institutional-grade strategies. As of November 2025, assets under management in these vehicles reached $160.5 billion, representing approximately 8% of all U.S. stock exchange trading activity. Retail investors drive the vast majority of this activity, accounting for roughly 90% of the turnover. The utility of these products varies significantly depending on the nature of the market volatility, as seen during the 2020 pandemic crash and the 2022 inflation-driven bear market. During the 2020 COVID selloff, retail turnover quadrupled, with traders initially moving into inverse ETFs before shifting back to bull positions at the trough. In contrast, the 2022 crisis saw retail traders fighting the downward trend for longer, taking nearly a month to flip from short to long positions after the October 12 bottom. The 2025 'Liberation Day' tariff event highlighted a shift toward high-conviction contrarianism. Despite the S&P 500 falling 19% over a period of 35 trading days, retail traders continued to buy long funds, only shifting to short positions on April 9, which coincided with a major market rally. The proliferation of single-stock leveraged funds since mid-2022 has expanded the toolkit for active traders, allowing for more precise, albeit riskier, expressions of market views during periods of extreme volatility.