Retail Trading Patterns Shift Amid Market Volatility and Leveraged ETF Adoption

Leveraged exchange-traded funds (ETFs) and notes (ETNs) have become a primary tool for active retail traders seeking to amplify short-term market views. As of November 2025, assets under management in these vehicles reached $160.5 billion, representing approximately 8% of total trading activity on U.S. stock exchanges. Retail investors drive the vast majority of this activity, accounting for roughly 90% of turnover. These products provide individual traders with access to institutional-style strategies, allowing them to pivot between bullish and bearish positions rapidly during periods of high volatility. Historical data highlights a shift in how these tools are used. During the 2020 COVID-19 crash, turnover in leveraged funds quadrupled, with traders eventually shifting from 3X leverage to more conservative products. In contrast, the 2022 inflation-driven bear market saw retail traders fighting the trend, maintaining long positions even as the market declined, and taking nearly a month to pivot after the October 12 bottom. The 'Liberation Day' tariff announcement in early 2025 triggered a 10.8% drop in the S&P 500 over two days. Retail behavior evolved further during this event, with traders buying into long funds for 35 consecutive trading days while the index fell 19%, suggesting a shift toward high-conviction contrarian trading. The proliferation of single-stock leveraged funds since mid-2022 has expanded the toolkit for active traders, enabling more precise expressions of market views during earnings and macroeconomic shocks.