Robinhood plunged 19.8% as US brokerage stocks took a significant hit.

Small investors panicked over the market's weakness, which is bad news for brokerage stocks. Shares of Robinhood, Interactive Brokers and Vanguard, among others, were hit hard on Monday as U.S. stocks broadly fell.

Some brokerage shares have seen their worst declines in years. Robinhood's stock plunged 19.8% on Monday, its biggest one-day decline since August 2021; Vanguard's shares fell 4.5%, its biggest since July 2024; Interactive Brokers' shares dropped 13%, its biggest since October 2009.

Markets widely interpreted President Trump's recent interview as suggesting that the U.S. economy could go into recession because of his economic policies, which added to fears of a recession and caused investors to flee some growth stocks and the stocks that are usually hardest hit in a downturn, including brokerage shares.

Brokerage firms' revenues are largely derived from interest and trading commissions, so they perform better when investors put more money into the market or trade more actively. However, the amount of money that small investors put into the market is heavily influenced by the performance of the stock market. In a bull market, stocks are usually pushed higher, increasing asset management and trading fees, so brokerage shares often perform well. In contrast, in a market sell-off, while volatility and sudden drops also spur trading activity, a recession or prolonged bear market has a chilling effect because investors trade less actively and put less money into the market.