Thursday, May 19, 2022

Day traders’ profits have been wiped out by ‘meme stock’ frenzy: report

According to a report, Reddit-obsessed retail stock traders have lost all their gains as the government stimulus that has kept markets afloat since the pandemic began comes to a screeching halt.

According to Morgan Stanley, who looked at retail traders entering the market for the first time in 2020, retail traders have been hit hardest by the recent fall in stocks, having lost all gains on average when the markets were at their peak. And made a basket of your favorite stocks.

While retail traders outperformed the S&P 500 from May 2020 to May 2021, their performance fell sharply – and remained flat this year to March 2022, even as the S&P 500 made gains during the start of the year .

A similar study involving the Goldman Sachs basket of retail stocks showed similar results. The retail stock nearly doubled in value from January 2020 to November 2021, but dropped 32% this year. Similarly, the purchasing power of retailers has also eroded. In April, day traders bought just $14 billion in shares — the second slowest purchase in nearly two years.

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Analysts say the Federal Reserve’s strictness is largely responsible for the drop-off.

Matthew Tuttle, chief executive officer of Tuttle Capital Management LLC, told Bloomberg, “Many of these people started trading around COVID, so their only investment experience was in dysfunctional, Fed-fueled markets. ” “It all changed with the Fed pivoting in November, but they didn’t realize it because they never saw a market that wasn’t backed by the Fed … the results have been terrible.”

GameStop
Pandemic The price of beloved GameStop has plummeted over the past year.
Christopher Sadowski

Companies that hit dizzying and apparently volatile heights during the pandemic – for retail investors like GameStop and AMC – are now plunging into their pre-pandemic valuations.

Day traders congregating on Reddit to push so-called meme stocks, including AMC, Gamestop and Blackberry, are out of cash as the market tumbles and the government is issuing stimulus checks.

AMC stock, which was selling for under $3 per share two years ago, hit a high of more than $60 per share last June. Since it’s high, the stock has crashed to trade around $12 per share.

GameStop, which was trading under $4 per share two years ago, hit a high of more than $344 before falling near $100.

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But what goes up must come down.

Robin Hood
Robinhood, which enabled the much-hyped pandemic, is seeing its own stock plummet.
AP

And even Robinhood — best known for its role in the “Reddit rally” retail trading phenomenon — which went public in July at $38 a share, posted a nose dive of more than 70% over the previous year. have put.

Robinhood’s stumbling block is a clear example that both the meme stock and the platform that operates the trading are out of fashion.

It’s a dramatic turn of events for “meme stocks,” which once became so heated that the Securities and Exchange Commission said it was seeing signs of market manipulation due to concerns about “volatility in certain stocks.” Was.

Of course markets across the board are struggling. Major indices, including the Dow Jones Industrial Average, S&P 500 and Nasdaq Composite, are down sharply this year. But it may be retail investors who really take it on the chin.

A broker who spoke on condition of anonymity told The Post, “Retailers don’t know what they’re doing…and it’s going to hurt more.”

Nation World News Desk
Nation World News Deskhttps://nationworldnews.com
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