Like Meme Stock Mania Fizzles, Wall Street sees ‘Big Reckoning’

Photographer: Tiffany Hagler-Geard / Bloomberg

Reddit’s day-trading crowd turned the first quarter of 2021 into one of the wildest periods of stock market mania in modern history. Books – in the plural – will undoubtedly be dedicated to the subject in the coming years.

But after these small speculators came together to raise dozens of obscure stocks in hundreds or even thousands of Percent – and in the process it burned some hedge fund barons who were betting on declines – the movement seems to be slowing down. An index that tracks 37 of the most popular meme stocks – 37 of the 50 that Robinhood Markets banned customers from trading during the height of the frenzy – is essentially unchanged for the past two months, after rising almost 150% in January.

Talk to the Wall Street veterans and they will tell you that this flat line is the beginning of what will be an inexorable downward movement in these stocks.

It is not so much about the weak fundamentals of companies. At least not in the short term. Day trading fanatics have demonstrated an amazing ability to ignore these facts. It is more that, as the pandemic slowly decreases and the economy begins to open, many of them will leave their homes and start to return to the offices and to the restaurants and embark on trips near and far. And in doing so, they can stop obsessing over their Robinhood accounts.

In other words, your collective dominance over the meme stock universe will decrease.

“People will do other things,” said Matt Maley, chief market strategist at Miller Tabak + Co. There will be a “big reckoning” at some point, he said. “There is no doubt in my mind.”

Of course, the Wall Street scenario, broadly speaking, misinterpreted the Reddit crowd for weeks earlier this quarter, and it is possible that your analysis is wrong again now. Preliminary data, however, suggests that they are right.

Recent reports suggest that vaccinated Americans are planning long-awaited vacations with surveys for “Google Flights ”reaching a popularity peak of 100 this week, according to a Google Trends tracker. The opposite is being seen for terms like “stock trading ”and“investing ”, which plummeted, shows Google Trends.

“The impact of stimulus checking on retail trade is diminishing,” said Edward Moya, senior market analyst at Oanda. “Many Americans want to participate in sporting events, travel around the country, vacation, visit family and friends and renovate wardrobes before going to restaurants, pubs and returning to the office.”

Read more: Americans signal they will spend stimulus on travel, not GameStop

Gamestop Juggernaut

Video game retailer GameStop Corp. he became the poster boy for retail traders who sought to rage against the hedge fund elite. However, the stock The 2.460% roller coaster alongside other favorites posted on Reddit’s WallStreetBets topic caused as much pain as joy.

The rise of more than 900% of the shares this year has attracted the attention of Wall Street analysts who follow them. The average 12-month target price implies that the stock will lose more than three quarters of its value compared to current levels. Only Jefferies maintains a price target close to closing at $ 191.45 on Thursday and that call came with the warning that the shares are “subject to volatility beyond fundamentals”.

But any GameStop negotiating sense of the fundamentals has been ignored since it captivated Wall Street and Reddit users in the latter half of January. The bulls are more than happy to publicize their bets on forums as a move to keep short sellers as they buy the revival of a company delivered by activist investor Ryan Cohen.

Read more: GameStop adds another Amazon executive to the team

Given away AMC Entertainment Holdings Inc.’s position as a cinema that many Americans have gone to at some point is not a complete surprise because Reddit users have rushed to the company’s advisor. #SaveAMC was a trend on Twitter and amateur investors seemed more than happy to fight Wall Street skeptics, despite the fact that most cinemas are closed due to the ongoing pandemic.