① Game Station and AMC skyrocketed 60% and 32% overnight. This crazy performance is like going back to the peak of “Retail vs. Wall Street” in 2021; ② However, many Wall Street strategists say that this new retail enthusiasm may ultimately be far from reaching the level of madness three years ago; ③ the favorable conditions of the “time, time and place” series of favorable conditions at the time may be difficult to replicate now.
GameStop and AMC surged 60% and 32% overnight, and both stocks doubled their gains in the past week. The crazy performance of all of these, which shocked the market, was like returning to the boom of the “Retail Battle Wall Street” in 2021...
However, many Wall Street strategists now say that this new wave of retail investors' enthusiasm may still be far from reaching the level of madness three years ago, because of a series of favorable conditions that “favorable time and place” at the time may be difficult to replicate now.
Marco Iachini, senior vice president of Vanda Research, wrote in a research report on Tuesday that his team believes that while retail interest may drive a further influx of capital into these stocks over the next few trading days, it is “very unlikely” that it will be repeated in 2021.
He said, “Today, quantification/hedge funds are better equipped to handle these situations. If any, we think they will participate in shorting with retail investors first, but they will also operate in reverse, and there is a high possibility that retail traders will collectively withdraw from these transactions before.”
The rise in influencer stocks in this round was driven by the return to social media of Keith Gill, a retail “leading brother” with the screen name “Roaring Kitty” (Roaring Kitty). Three years ago, it was Gill who actively posted on the Wallstreetbet section of the Reddit forum, encouraging a large number of US retail investors to pour into GameStop stocks, thus triggering the “retail investors emptied Wall Street” incident that shocked the world.
After posting an image announcing his return, Gill then posted a series of short videos of popular TV shows and movies, some of which are unclear about the meaning behind them.
However, at least at this stage, the market behavior of retail investors is still far from the level of capital inflows in 2021. According to data from VandaTrack, the net inflow of GameStation this Monday was 15.8 million US dollars, while AMC attracted 37.5 million US dollars. These two sets of figures are actually still far worse than in January 2021 — the peak daily capital inflows for GameStation and AMC reached 87.5 million US dollars and 170 million US dollars, respectively.
Iachini wrote that although capital inflows to both stocks have surged, compared to the situation at the beginning of 2021, their scale can only be considered unbelievable.
The limitations of retail investors: no money, no space, high interest rates?
Nicholas Colas, co-founder of DataTrek, also pointed out the differences between the current market and 2021 in a note to customers on Tuesday.
Colas wrote, “American retail traders are no longer just sitting at home, doing almost nothing but trading stocks. The federal government will also not airdrop trillions of dollars in stimulus funds.”
“Yes, we're sure we'll hear more about MEME stocks in the next few weeks, but it won't be as hot as it was 3 years ago,” Colas said.
Apart from not having that much free time and money, the Federal Reserve's interest rate is currently at a high level of 5.25%-5.5% for over 22 years, which is not the same as the zero interest rate situation after the 2021 pandemic. For investors who don't have enough money, any borrowing act has become quite a burden.
In fact, although some other unknown stocks joined GameStop and AMC's gains this week. For example, the photovoltaic company Sunpower surged more than 80% under pressure on Tuesday, an urgent question facing investors is whether this risk appetite environment will spread throughout the market and create a bubble-like atmosphere.
According to Colas, “We're not close to this level right now.”
“Every bull market has its excessive side, but it only becomes dangerous when this situation becomes common. For example, internet stocks in the late 1990s and speculative small-cap stocks in 2021,” Colas wrote. “Today, a series of activities surrounding game stations is still normal, even if it reminds me of the foolish behavior of previous markets.”
John Higgins, chief market economist at KITU Macro, also believes that this doesn't look like the previous bubble. Higgins wrote, “Even though interest in MEME stocks rebounded after GameStop's stock price soared again, there are no signs that the broader stock market bubble may be in its final stages — such as excessive leverage.”
Editor/Jeffrey