Amateur trader Omar Ghias says he amassed roughly $1.5 million as stocks surged during the early part of the pandemic, gripped by a speculative fervour that cascaded across all markets.

As his gains swelled, so did his spending on everything from sports betting and bars to luxury cars. He says he also borrowed heavily to amplify his positions.

When the party ended, his fortune evaporated thanks to some wrong-way bets and his excessive spending. To support himself, he says he now works at a deli in Las Vegas that pays him roughly $14 an hour plus tips and sells area timeshares. He says he no longer has any money invested in the market.

“I’m starting from zero,” said Mr. Ghias, who is 25.

During the pandemic lockdowns in 2020 and 2021, scores of Americans got hooked on trading stocks, options and cryptocurrencies, driving up shares of companies that were once left for dead. Now some of these so-called retail investors are backing away from the markets after the worst year for stocks since 2008. Others are paring their positions or shifting their money to more conservative holdings, such as bonds or cash.

Last month, trading activity among retail investors as measured by dollar volumes hit its lowest level since January 2020, according to an analysis of some platforms by research firm Vanda Research. These investors are also trading less with brokerages that stoked their enthusiasm earlier in the pandemic, according to earnings reports. Households are expected to yank roughly $100 billion from the market in 2023, according to Goldman Sachs Group Inc., which would be the first net outflows since 2018.

What these amateur investors decide to do next will have big implications for the direction of the market. They are still collectively the biggest holders of U.S. equities, according to Goldman Sachs, and any retreat from stocks could remove a steady source of support at a turbulent moment. Fears about inflation and a possible future recession continue to loom, and many big companies are bracing for economic turmoil. Central-bank officials have repeatedly said their work to cool the economy isn’t done.

A run-up last month in certain stocks such as online car seller Carvana Co. and retailer Bed Bath & Beyond Inc. led some professional investors to speculate that individual investors were behind the moves. The overall market pushed higher this past week after the Federal Reserve raised interest rates by a widely expected quarter percentage point; the S&P 500 is up 7.7% thus far in 2023 and the Nasdaq 15%.

The early 2023 rally is still a far cry from what happened two years ago. Stuck at home during the Covid-19 pandemic and flush with stimulus checks, newbie traders encouraged each other to pile into stocks as they banded together on online forums such as Reddit, Discord and Twitter. At times they tried to intensify losses among professional traders who had bet against some of their favourite companies. The frenzy resulted in eye-popping surges in shares of troubled firms such as GameStop Corp. and AMC Entertainment Holdings Inc. Momentum trumped coolheaded analysis of company fundamentals.

Some of these rookie traders made small fortunes in 2021. But many lost money the following year as U.S. stocks fell along with bonds and cryptocurrencies, and their enthusiasm for trading waned.

The average individual investor’s portfolio has declined 27% since peaking in December 2021, according to estimates from Vanda Research, compared with the S&P 500’s roughly 13% decline over the same period. Monthly active users at online brokerage app Robinhood Markets Inc., which helped make trading cool among newbies, recently fell to their lowest level since the company went public. At the more traditional brokerages of Morgan Stanley and Charles Schwab Corp., the average daily number of retail trades recently fell to the lowest levels since at least 2020.

Some retail investors are still active but more conservative with their bets. Sumit Gupta, a 49-year-old ophthalmologist in Charlotte, N.C., was among those who bought the dip in stocks in early 2022, when shares of everything from big tech stocks to broader S&P 500 dropped. He says he has been regularly adding to stockholdings over the past decade, using the dollar-cost averaging method.

The market kept falling. The S&P 500 notched its worst year since the 2008 financial crisis, stymied by a Federal Reserve forced to aggressively raise interest rates to cool red-hot inflation.

Since then, Mr. Gupta said, he realized how serious Federal Reserve Chairman Jerome Powell was about raising interest rates and has shifted his strategy. He says he is putting extra cash into Treasurys. Yields on 10-year government bonds are hovering around 3.5%, up from less than 1% in 2020.

“Now there’s yield on cash again,” Mr. Gupta said. “At this stage in my career, I don’t need to be aggressive.”

Jonathan Javier, 28 years old, accelerated his trading during the pandemic, after mainly buying and holding investments for years.

Drawn in by the meteoric price increases in everything from cryptocurrencies to the S&P 500, he scooped up shares of technology stocks such as Meta Platforms Inc. and Apple Inc. He says he watched in awe as his portfolio roughly doubled through November 2021. Having worked at several big tech companies, he says he was confident they would keep growing, as they had for much of the past decade.

By mid-2022, the portfolio made a U-turn, falling about 8%. He says he slashed his regular investments by around half and backed away from the market. “I didn’t do much at all” last year, Mr. Javier said.

This year he says he bought some tech stocks once again, though he says he is much more wary of how much of his money he is comfortable risking. He says he is also not darting in and out of positions as much.

“Now I know the key to making a profit is buying when the stock is at a low price point instead of just buying and ‘hoping’ that I will make a gain from it.” Mr. Javier said.

Navroop Sandhu, a 32-year-old London web developer, was a newcomer who became enamored with trading during the early days of the pandemic as the value of a new account she created with online brokerage eToro skyrocketed. She would enter and exit positions within hours or hold for weeks, and actively participated in an online Discord trading group. She says she once asked her friends to bring their laptops with them to a restaurant in London, so she could dish out investing tips.

“It was like a snowball effect, where I just got addicted,” Ms. Sandhu said.

Now she says she is placing anywhere from two to five trades in a week, down from nearly 10 in some weeks in 2020. Ms. Sandhu says she is also trying to be patient in picking the right trading spots, which has helped her stay in the markets.

Some investors have exited the market. They include Mr. Ghias, the 25-year-old amateur trader who watched the value of his stock portfolio swing wildly during the early stages of the pandemic.

Mr. Ghias says his first exposure to investing happened as a teenager growing up in the suburbs of Chicago, where his guitar teacher would monitor stocks by phone. He and that guitar teacher say they would discuss everything from penny stocks to pot stocks to shares of larger companies. When he got to high school, he started trading with some of his own money in between jobs. He says he sometimes cut class in high school and college to trade.

Once the pandemic began, he gravitated to stocks and funds tracking the performance of metals as well as options, which allow investors to buy or sell shares at a certain price. He used these to generate income or profit from stock volatility. He also borrowed from his brokerage firms to amplify his positions, a tactic known as leverage.

In 2021, he started increasing that leverage, his brokerage statements show. He often turned to trades tied to the Invesco QQQ Trust, a popular fund tracking the tech-heavy Nasdaq-100 index, while continuing to bet heavily on metals. At times, he dabbled in options tied to hot stocks such as Tesla Inc. and Apple.

At one point, his leverage amounted to more than $1 million, brokerage statements reviewed by The Wall Street Journal show. By around June 2021, according to those brokerage statements, his portfolio was worth roughly $1.5 million.

“I really started treating the market like a casino,” Mr. Ghias said.

As his stock-market gains swelled, so did his spending and partying, he says. He says he started betting thousands on professional football games and enjoyed late nights at bars, racking up tabs drinking Don Julio 1942 tequila. Mr. Ghias and his former roommate Nick Palma say he spent thousands to see the Tampa Bay Buccaneers play, while betting roughly $35,000 that they would beat the Los Angeles Rams and go on to win the Super Bowl. They lost.

He and his former roommate say Mr. Ghias also footed the bill for friends to stay at a Las Vegas hotel and rented a black Lamborghini that he raced through the Strip. Some of his exploits, including the Lamborghini ride, he showed on a TikTok account that also featured footage of him trading in front of three computer screens. He says he stopped taking classes at DePaul University, in Chicago, so he could spend more time focused on the markets.

In late 2021, he placed one of his biggest bets. The Fed’s Mr. Powell had warned he was about to pull back the central bank’s easy-money policies, opening the door to tapering its monthly asset purchases. The plans threatened to inject a jolt of turbulence into a market that had been ascending to fresh records for much of the year.

Mr. Ghias says he thought the Fed was bluffing and made a speculative investment that he thought would benefit from an accommodative central bank, expecting prices of silver and gold to rally and help a portfolio that included a large position in Hecla Mining Co., statements show. He says he also added a bearish position tied to the Nasdaq.

The trade didn’t work, he says, and a broker demanded he post more money to fund his losses. By the end of the year, according to his statements, he had lost more than $300,000 in one account even as the S&P notched a gain of 27%.

“That was my breaking point,” Mr. Ghias said.

In 2022, he says he started taking even more risks trading options and betting on sports in hopes of making some of the money back. One big strategy was to gamble on the direction of the S&P 500 by buying and selling options contracts tied to that index that often expired the same day, brokerage statements show.

Mr. Ghias traded S&P 500 options at all hours, sometimes around midnight, placing some trades worth hundreds of thousands of dollars, brokerage statements show. For example, if he had a hunch that the S&P 500 would keep tumbling the next day, extending losses from its overnight session, he might sell options contracts that would profit from a steeper plunge. At times, he was left with losses from such trades, his statements show.

“That just put me in a really bad mental state,” Mr. Ghias said. “I began chasing losses.”

By the end of 2022, he had racked up bills of more than $300,000 on his American Express Platinum card, according to snapshots of his account viewed by the Journal, and he says the nest egg that had climbed to around $1.5 million was gone. “I lost it all,” Mr. Ghias said.

He decided to move to Las Vegas and began to work at an Italian deli and restaurant on the outskirts of town. He says he has also picked up short-term gigs and started selling timeshares. He is going on other job interviews, too, while documenting his new life on TikTok under the alias “OGTraderTV.” When one of his TikTok followers learned about his cash crunch, Mr. Ghias says he was offered a free stay at the Bellagio Hotel & Casino.

He says he has no money in the market right now and shared screenshots of his accounts showing that he has roughly $15,000 in credit card debt, around $36,000 in an auto loan and $6.99 in a checking account. He says he has some cash, too.

“I felt like I was indestructible,” Mr. Ghias said of his trading days. “It was irrational.”

WASHINGTON—The Federal Reserve approved an interest-rate increase of a quarter-percentage-point and signalled plans to raise rates again next month to continue lowering inflation.

The decision Wednesday followed six consecutive rate rises that were larger, including an increase of a half-point in December and a 0.75-point increase in November.

Officials nodded to recent improvement in inflation readings but didn’t significantly alter their guidance in a policy statement released after the meeting regarding coming rate moves.

“The committee anticipates that ongoing increases” in interest rates “will be appropriate in order to attain a stance of monetary policy that is sufficiently restrictive,” said the statement, using the same language included in policy statements since last March.

The latest increase caps a year in which the Fed lifted its benchmark federal-funds rate from near zero to a range between 4.5% and 4.75%, a level last reached in 2007. That extends the central bank’s most rapid pace of rate increases since the early 1980s to fight inflation, which hit a 40-year high last year.

One big question heading into Wednesday’s meeting was the extent to which recent economic data had given Fed officials more confidence that inflation and wage pressures had peaked.

In December, most of them penciled in raising the fed-funds rate to a range between 5% and 5.25% this year. After the hike they approved Wednesday, that projection would imply additional quarter-point increases at the Fed’s meetings in March and May, followed by a pause in rate rises.

Many officials had repeated in recent weeks that they still saw such a rate path as appropriate given strong wage pressures, a tight labour market and high service-sector inflation. But officials also said they would base their decisions on how the economy performs in the coming months.

“We can now say for the first time, the disinflationary process has started,” said Fed Chair Jerome Powell at a news conference after Wednesday’s meeting. But he added, “The job is not fully done.”

Mr. Powell said the central bank was trying to manage the risk of raising rates too much and causing unnecessary economic harm with that of not doing enough to bring down inflation. In repeating his longstanding view that the latter mistake would be harder to fix, Mr. Powell said he didn’t want to be in a position where six or 12 months from now, after a halt to raising rates, the Fed would belatedly conclude that it hadn’t done enough to bring down inflation this year and would have to raise rates higher.

“We’re going to be cautious about declaring victory and sending signals that we think the game is won,” he said. “Certainty is just not appropriate here.”

The fed-funds rate influences other borrowing costs throughout the economy, including rates on mortgages, credit cards and auto loans. The Fed is raising rates to cool inflation by slowing economic growth. It believes those policy moves work through financial markets by tightening financial conditions, such as by raising borrowing costs or lowering prices of stocks and other assets.

Officials have been guarded in recent weeks about providing any guidance that might ignite market rallies that could undermine their efforts to fight inflation.

In recent weeks, markets have rallied partly because investors anticipated that the Fed would slow its rate increases this week and remove uncertainty over the rate outlook, which reduces interest-rate volatility. Lower volatility can ease financial conditions.

Markets have also been cheered by news that inflation and wage growth might have peaked last year, which could make the Fed more comfortable in pausing rate increases. Since Fed officials met in December, economic activity has been mixed. Consumer spending has moderated, and manufacturing activity has weakened. But hiring has held steady, pushing the unemployment down to 3.5% in December, a half-century low.

Investors in bond markets increasingly expect that the Fed will cut interest rates later this year because of a sharp slowdown in economic activity that lowers inflation faster than policy makers expect.

Fed officials and some economists, meanwhile, are concerned that the recent decline in inflation could reflect the long-anticipated easing of supply-chain bottlenecks—and that might not be enough to bring inflation down to the Fed’s 2% goal.

“I’m somewhat worried that the market view is based more on hope,” said Karen Dynan, an economist at Harvard University who served in the Obama administration. “Labor markets still look really tight.”

Officials’ deliberations over how much more to raise rates this year and how long to hold rates at some higher level could hinge over how much they think their past increases will slow the economy this year. Debates could also turn on the degree to which wage and price pressures might slow without significant weakness in the job market.

Officials agreed to slow rate rises to gain more time to study the effects of their moves.

Inflation fell to 4.4% in December from 5.2% in September, as measured by the 12-month change in the personal consumption expenditures price index excluding food and energy. Though still above the Fed’s 2% goal, it moderated in the October-to-December period to an annualised 2.9% rate.

“Inflation has eased somewhat but remains elevated,” said the Fed’s policy statement.

Overall inflation is slowing largely because prices of energy and other goods are falling. Large increases in housing costs have slowed, but haven’t filtered through to official price gauges yet. As a result, Mr. Powell and several colleagues shifted attention recently toward a narrower subset of labor-intensive services by excluding prices for food, energy, shelter and goods.

Mr. Powell has said prices in this category, which rose 4% in December from a year earlier, offer the best gauge of higher wage costs passing through to consumer prices.

WASHINGTON—The Biden administration is turning to India for help as the U.S. works to shift critical technology supply chains away from China and other countries that it says use that technology to destabilise global security.

Administration officials hosted meetings this week with a delegation of Indian officials and U.S. industry executives, seeking to facilitate technology development and investment in India as part of a broader U.S. push to cultivate alternatives to China.

Challenges arising from Beijing’s expanding global influence have had “a profound impact on the thinking in Delhi just as they have had on the profound impact on the thinking in other capitals,” White House national security adviser Jake Sullivan told reporters on Tuesday. “There is an element of that that forms a backdrop for the discussions here.”

The meetings come on the heels of an agreement with Japan and the Netherlands to start restricting exports of advanced chip-manufacturing equipment to China, joining efforts by the Biden administration to slow China’s military development by cutting access to advanced technologies.

U.S. officials hope those export restrictions create opportunities in India and elsewhere. While India isn’t among the world’s top producers of semiconductors, New Delhi has sought to assert itself as a greater semiconductor player. India is an appealing partner for industries looking to diversify their supply sources. With a population of 1.4 billion people, the country has a massive source of labor and costs are relatively low.

On Tuesday, the administration hosted a task force organised by the Semiconductor Industry Association, which is working in partnership with the Indian Electronics and Semiconductor Association, to develop a “readiness assessment,” aimed at trying to accelerate cooperation and investments. The meetings were attended by top American executives from a range of industries, including defense giant Lockheed Martin and semiconductor producer Micron, administration officials said.

India’s national security adviser, Ajit Doval, led New Delhi’s delegation this week in meetings with Mr. Sullivan and Commerce Secretary Gina Raimondo and other officials.

The meetings underscore a broader U.S. effort to meet challenges from China through alliances with other countries. The Biden administration has given priority to Washington’s relationship with what is known as the Quad—an alliance between India, Australia, Japan and the U.S. that has focused on countering Beijing.

“President Biden really believes that no successful and enduring effort to address any of the major challenges in the world today…is going to be effective without a close U.S.-India partnership at its heart,” a senior administration official said.

However, a number of challenges in recent months have strained relations between Washington and New Delhi. India has maintained a neutral stance on the war in Ukraine and has continued to purchase discounted oil from Russia, rebuffing the Biden administration’s offer to replace Russian oil with U.S. supplies. Instead, India has increased its imports of Russian crude.

Biden administration officials said they understand the enormous domestic demand facing India and said that India continues to buy oil well below the price cap agreed to by allies late last year.

The key, U.S. officials said, is to offer India alternatives. The administration remains hopeful that it can ween India off purchasing Russian military equipment by offering incentives for it to diversify. Mr. Sullivan said generally, the U.S. is doing that through joint production and development. Top priorities in that effort include joint development of jet engines, artillery systems, armoured infantry, vehicles and maritime security.

General Electric has just submitted a proposal to the U.S. government for a jointly produced jet engine in the defence technology space.

“This is the kind of thing where we’re looking to make fast and ambitious progress,” Mr. Sullivan said.

India has also expressed frustration that two years into the Biden administration, there remains no U.S. ambassador. Earlier this month, the White House submitted to the Senate dozens of presidential selections who failed to win confirmation last year.

India is among a number of countries to also call for an overhaul to the U.S. H-1B visa, a nonimmigrant visa that allows U.S. companies to employ foreign workers in specialty occupations that require theoretical or technical expertise. Advocates have called for reforms to the program, including an increase in the annual cap, as well as for a more simplified process.

The State Department has made some progress on the issue, but employers expect delays in obtaining visas to continue in some places, including India. Visitor visas will likely also remain problematic.

The eurozone economy grew faster than China and the U.S. last year, underlining how the fading Covid-19 pandemic continues to scramble traditional patterns of global growth.

Figures released by the European Union’s statistics agency Tuesday showed the currency- area’s economy grew at an annualised rate of 0.5% as higher energy costs weighed on household spending. This translated into 3.5% growth in gross domestic product for 2022 as a whole, a faster rate than seen in either China or the U.S.

This is unusual. For decades, the big three engines of the global economy have had a pretty stable ranking: China grew fastest, followed by the U.S. and then the eurozone. This all changed last year because of the staggered manner in which major economies reopened in the wake of the pandemic.

Figures released Thursday showed the U.S. economy grew by 2.1% in 2022, a sharp slowdown from the 5.9% rate of expansion recorded in 2021. Earlier this month, China’s statistics agency released figures that showed the world’s second-largest economy grew by 3%, down from 8% the previous year.

The last time that the combined national economies that make up the eurozone grew at a faster pace than that of either China or the U.S. was in 1974. The U.S. economy has typically outpaced Europe’s over recent decades largely because its population has grown more quickly. More recently, the U.S. has led Europe in the development of fast-growing technology sectors.

Last year’s unusual growth ranking largely reflects the impact of the Covid-19 pandemic on the world economy, with the timing of lockdowns and re openings leading to big swings in growth, as well as high rates of inflation.

It is an effect that is unlikely to last. As China abandons its zero-Covid policy, it is likely to reclaim its position as the fastest-growing of the big three economic areas. And the war in Ukraine is having a bigger impact on the economy of Europe than that of the U.S. or China, as the slowdown in the last quarter of 2022 testifies.

“2022 was just a weird, weird year,” said European Central Bank President Christine Lagarde during a panel at the World Economic Forum’s annual meeting in Davos earlier this month. “Those are not normal numbers, this is not the usual ranking that you have.”

In the eurozone, the influence of the pandemic on the economy was so strong last year that it offset that of Russia’s invasion of Ukraine and the surge in energy prices it prompted.

While China experienced a series of lockdowns in pursuit of its zero-Covid policy, the eurozone enjoyed its first full year without tight restrictions, and a boost to activity that the U.S. had experienced a year earlier.

The big three economies locked down hard in 2020. But the U.S. reopened more fully from early 2021, outpacing the eurozone and China in the first three months of that year in particular. The eurozone’s reopening boost started later, and carried over into the first half of 2022 as its key tourism industry rebounded.

This year is likely to see the pandemic continue to have a big impact on growth—this time in China. The country lifted many of its zero-tolerance pandemic controls in early December in an abrupt change of course. While that led to an increase in Covid-19 infections and deaths, it also opened the door to a sharp economic rebound in the world’s second-largest economy.

For this year, the United Nations expects China’s economy to grow by 4.8%. It expects both the U.S. and the eurozone to slow, to 0.4% and 0.2% respectively. If it is correct, the normal growth ranking will be restored, although at lower-than-normal rates of growth. And from 2024, the pandemic’s impact is set to wane, unless a more deadly, rapidly-spreading coronavirus variant emerges.

“By 2024 we should be out of the woods,” said Hamid Rashid, head of the U.N.’s global economic monitoring unit. “We are still having the lingering impact of the pandemic in 2022 and 2023.”

High inflation rates, partly a legacy of the pandemic, are also expected to fade by 2024. Inflation rates began to surge in early 2021 as the reopening of the U.S. and other economies led to a surge in demand for goods and services at a time when global supply chains were still impaired.

According to a measure of supply-chain pressures compiled by the Federal Reserve Bank of New York, the blockages caused by the pandemic reached a peak at the end of 2021, and then eased steadily through the first nine months of last year. But that improvement in supply chains stalled in the final three months of 2022 as China imposed lockdowns to counter fresh outbreaks of Covid-19. Supply chains seem set to continue their slow return to prepandemic conditions in 2023 after the zero-tolerance strategy was abandoned.

Rates of inflation around the world appear to be easing, but it has taken unusually aggressive action by global central banks to get to that point. The Federal Reserve has raised interest rates by more than 4 percentage points since March, the largest move in a single year since 1980. The European Central Bank has moved at a slower pace, pushing up its policy rate by 2.5 percentage points starting in July, but that is the fastest increase since it was founded in 1998.

Both central banks are expected to raise their key interest rates this week, with the ECB likely to tighten more than the Fed. Further increases in borrowing costs will affect businesses and households not just in the U.S. and Europe, but around the world.

“The global effects are real, but they are not taken into account by the systemically important central banks,” said Mr. Rashid at the U.N., “it is harder for developing countries to borrow and invest.”