Darker market mood sets in, one year after GameStop frenzy

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This time last year, millions Amateur investor Dive into a dangerous place in the US financial markets in search of wealth, Stock firing Crushed retailer GameStop is thousands of percent higher, confusing professional fund managers.

Today, big and small investors are watching bets that define a speculative pandemic. Withdrawal of the Federal Reserve From the stimulus that has kept the market soaring for nearly two years.

The prices of meme stocks, cryptocurrencies, cannabis companies, and blank check cars known as Spacs all fell as air hiss noise from the assets that encapsulated their ferocious rally, and the game on the market has changed. There is no mistake.

John Lennard, Global Head of Equity at Macquarie Asset Management, said: “A long-term super-growth stock was taken out and shot.”

According to data analyzed by the Financial Times, the average stock price of the broad-gauge Russell 3000 in the US stock market has fallen by about 35% from its 12-month high.

The Nasdaq Composite Index, home to many fast-growing companies that were prevalent during the pandemic, has seen an average decline approaching 45%.

BlackRock’s portfolio manager, Ras Caseterich, said speculation has been fueled by an “extraordinary liquidity environment” since the outbreak of the coronavirus.

When pandemics devastated communities around the world and disrupted financial markets, central banks and the US government intervened and put trillions of dollars into the economy to prevent a financial crisis.

“It was a big boost for all kinds of risky assets. It was Spacs, IPOs, cryptocurrencies,” Koesterich said. “Recently, we’ve seen a setback in all of this, but I don’t think they’re irrelevant. The Federal Reserve is very clear that they want to curb excesses. It’s unclear how far they will go. It’s not, but it’s clear that we won’t get the same level of support as before. “

Market tensions became apparent even before they were called concerns when the Omicron coronavirus mutant spread rapidly around the world in late November.

After the first boom in January and February last year, stocks of tech companies in the red were struggling. However, according to the Goldman Sachs index, it hit highs again in October and November, reached its highest level in the eight months of November 9, and electric car startup Rivian set its initial public offering price. Decided. A day later, Bitcoin’s price soared to a record just below $ 69,000.

The euphoria was short-lived.in the meantime Rivian market The value rose for a few days, temporarily surpassing Volkswagen. Inflation data fluctuates Fed and investors. Markets have begun to adapt to the new reality that solid interest rates and simple policies are no longer guaranteed.

Previously overpriced stocks such as Virgin Galactic, DraftKings at sports betting sites, and plant-based meat producers Beyond Meat All Fall More than one-third from early November to the end of the year. Bitcoin, which many investors are currently looking at as a measure of their sentiment towards speculative assets, has temporarily halved in value since its peak in November and has fallen dramatically.

Ryan Jacob, a veteran tech investor who runs Jacob Internet funds and technology-focused ETFs, was convinced that many investors had the potential for new tech, but when he found it, he coded. It’s hard to tell which business in the new space will take off, saying the market had “reactions of what happened in the dot-com boom.”

“There will be some very large companies coming out, but that’s the easy part,” he said. “The tricky part is which one to find. 90% of businesses may be complete trash.”

Fluctuations were particularly volatile for companies at the heart of the memetic stock frenzy. Video game retailer GameStop’s share has fallen by about 80% from last year’s record.It’s still well above the price that was popular the day before Reddit trader, R / WallStreetBets Some of the people who gathered on the bulletin board sparked a “short squeeze” to hurt hedge funds betting on stocks. However, day traders have made great strides.

Trading volumes for so-called meme stocks such as GameStop, movie theater operator AMC Entertainment, retailer Express, and telecommunications group Nokia are declining.

Line chart of daily value ($ 1 billion) of traded stocks showing a plunge in meme stock trading

Instead, investors are flocking to other parts of the market, including options that were largely avoided last year. This month’s traders broke the record, given that the S & P 500 and Nasdaq hit record highs and then stopped hitting record highs. Purchasing equity put options.. Contracts provide protection and the potential to profit from market slips.

Wall Street strategists point out that many of the new put options were bought and sold on the same day, indicating that traders aren’t just trying to protect themselves from being sold out. Instead, it shows that they are trying to profit from daytime fluctuations in option prices.

Preston Seo, a U.S.-based YouTube influencer, recently surveyed followers and claimed that most of them were looking for bargains, but they flooded his inbox with a message asking for guidance. Said that.

“On the surface, many of these young investors may appear confident in” buying a dip. ” But in a closed room, it’s likely that you’ve never faced such a recession, which raises anxiety. ”

The threat of higher interest rates helped fuel that anxiety.This week’s Fed is March lift rate For the first time since 2018, Chair Jay Powell has left the door open for more aggressive action to curb inflation and cool the fast-growing economy.

“People who put everything in there will find that there is no shortcut to wealth … This kind of speculative enthusiasm will soon disappear,” said Charles Schwab’s Managing Director of Trading and Derivatives. Randy Frederick says. “The good thing is that it doesn’t exclude the entire market.”

Frederick added that the recent reversal will be a tough lesson for new traders who have focused their investments on a small number of assets.

“All generations have to learn those mistakes on their own, no matter how much we try to warn them for a while,” he said. “It’s a little different game every time, but the end is always the same. The hard part is figuring out exactly when it happens.”

Darker market mood sets in, one year after GameStop frenzy Source link Darker market mood sets in, one year after GameStop frenzy

The post Darker market mood sets in, one year after GameStop frenzy appeared first on California News Times.

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