Thursday’s recovery is looking a little premature, with US futures off around 1% and tracking losses across Europe and Asia on the final day of the week.
Robinhood and others may have temporarily hit the reset button on the Reddit revolt but the retail community is not deterred. With the company gradually reintroducing trading on the stocks, the retail revolution looks set to continue with GME up around 100% in pre-market trade.
With the retail community more fired up than ever and turning their anger and frustration towards those seeking to oppress them – or so the narrative goes – the next few weeks could be a wild ride. The community has already achieved one thing, they’ve dug up names I’d long forgotten existed. I look forward, if nothing else, to all the nostalgia in the coming weeks as more forgotten firms turn into multi-billion dollar companies overnight.
This remarkable trend does appear to be causing waves across the broader market as well, which is another development that should be fascinating to watch unfold. The logic of hedge funds having to unwind profitable long stock positions to cover short losses is seemingly dragging on these markets and perhaps at the worst possible time.
It was already becoming apparent that stock markets had lost their buzz. All that good news into year-end being priced in combined with more severe and prolonged lockdowns around the globe left investors feeling a little lost. Suddenly the talk switched to whether we’re seeing frothy markets and bubble-like behaviour, and the pullback was underway.
Nothing major to worry about, of course, a temporary blip in an otherwise healthy market. But the problem could be exacerbated if the narrative gathers momentum or losses mount, forcing more action. I think the start of the year was always shaping up for a pullback but that doesn’t mean a helping hand can’t help facilitate that quicker.
The economic data isn’t likely to provide the lift investors may be looking for. Being locked up at home is obviously not great for a functioning economy and while GDP data from Europe this morning suggests some countries may avoid a double-dip recession, that’s hardly something to celebrate. And let’s face it, Germany’s 0.1% growth can easily be revised away.
An onslaught of US data today will be of interest, although it may get overlooked by the frenzy around the open on Wall Street. In ordinary times, income, spending, housing and inflation could set the mood for the session. That may not be the case on this occasion but will be interesting none-the-less.
Earnings and the Fed were meant to be two other sources of potential inspiration this week but both have been massively overshadowed. Who’d have thought a few weeks ago that Apple (NASDAQ: AAPL ) earnings in a supercycle would be overshadowed by GameStop (NYSE: GME ), AMC, Blackberry (TSX: BB ) and Bed Bath and Beyond? You have to laugh.
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