When consumers sneeze, investors catch a cold
The stratospheric results of Nvidia, the highly confident statement from its CEO and the enthusiasm of its followers were clearly not enough. The day after the electronic chip giant published its results, US markets opened on 20 November 2025 with a roar, buoyed by a 5% rise in its share price. However, markets closed the day deep in the red, suffering the biggest intraday change in trend since Liberation Day and, prior to that, COVID.
Whilst growing doubts about the AI area – from valuations to the financing of investment expenditure – represent the backdrop to the recent fall in markets, this may hide other underlying trends, specifically, that the retail sector in the US – be it consumers or investors – is running out of steam. On the consumer side, recent results from the discounter Target and DIY group Home Depot have again underlined the fragile health of demand. They echo the difficulties of the fast-food chain Chipotle, which also highlighted a fall in household spending. Several factors have been put forward to explain this weakening: inflation remaining relatively high (and even accelerating for consumer goods), employment weakening, and student loan repayments resuming since the start of the year have all encouraged US citizens to keep their wallets in their pockets.
Retail investors also seem to be less enthusiastic: having been a powerful support for markets in recent years, always willing to buy on weakness, they now seem to have run out of steam. All the favourite themes of retail traders have been amongst the worst performers in recent weeks: cryptocurrencies, Bitcoin-linked securities, unprofitable tech stocks, etc. And all this against the background of a sell-off in leveraged products, particularly ETFs, a particular favourite of US retail investors.
It’s hard to distinguish between chicken and egg, but it’s clear that the two roles of US households – as consumers and investors – are closely linked. It’s a pretty safe bet that as their ability to consume is eroded, US citizens will see their ability to invest in markets similarly undermined. Conversely, the fall in equity markets and cryptocurrencies is also likely to have a negative impact on spending intentions, just as the stock market rally of recent years stoked household consumption on the back of the wealth effect.
From a stock market perspective, the health of US households is a key factor. As there is little incentive for fundamental investors to invest massively at current valuation levels, and as tracker funds simply amplify upwards and downwards movements, retail investors have often been the main block behind buying momentum. If their interest in buying is weakening, this could represent a real change in the momentum of market flows. Whilst the AI ecosystem – quite rightly – crystallises various worries and questions, this is a medium- or long-term issue. In the short term, we should perhaps be more worried about the fate of US retail investors and consumers. This implies that, more than ever, we should be paying great attention to the main factor in the health of households – employment.