Game Stop Crash The Stock Market?
Word on the street is that Game Stop Crash The Stock Market. Seriously, that’s the word on the street, according to Barrons. Everything was down today the S&P 500, NASDAQ, and the Dow Jones Industrial Average were down to their worst since the week of October 30 last year. To be more specific, the Dow Jones Industrial Average dropped 1,014.36 points this past week, while the S&P 500 Index dropped 3.3% to 3714.24, and the Nasdaq Composite slid 3.5% to 13,070.69.
The reasoning behind this statement is that hedge funds had to do a massive sell-off of other stocks and options to cover their huge loss due to their short position on Game Stop, AMC, and other shorted stocks. However, there other culprits in the sudden drop in the Stock Market. News that the US economy only grew 4% in the 4th quarter coupled with news that Johnson and Johnson’s vaccine only had an efficacy rating of 66% spoked investors.
Many investors were hoping for betters news on the Johnson and Johnson vaccine. Their vaccine is supposed to be a vital part of tackling the pandemic in the United States so the country can get back on track. So the news that their efficacy is below 80%, and the economy growing slower than expected in the fourth quarter, investors got spoked and decided to sell their stocks and take their profits.
Overall, the volatility introduces into the market due to the battle between wall street hedge funds and Reddit’s Wall Street Bet whipped lots of investors into a frenzy. One can imagine that retail investors and hedge funds were selling out of positions they were either profitable or losing in to jump on the wall street bet short squeeze.
The Power of Retail Investors
Wall Street got a huge wake-up call this week, stop underestimate retail investors. Individually they might not have enough money to compete but collectively they do. With the help of the internet, it’s easy to mobilize and get a topic or news trending. This is the advantage that retail investors now have.
They now have access to the same information as hedge managers and collectively they have access to large capital. Hedge Funds usually had all the advantages. They had the capital, access to information, and faster access to the market. However, via platforms like Robinhood, Webull, CashApp retail investors have direct access to the market and have access to information as well. The only advantage retail has left is huge capital and connections. However, that is slowly being taking away as well, the next generation of traders will prefer to trade for themselves without paying any fees.
The future will have many more battles between wall street hedge funds and retail investors as they battle for supremacy.
