Meme stocks start 2023 on a high note as investors re-embrace risk

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Resurgent risk appetite among some investors is fueling rallies in the shares of so-called meme stocks after a crushing year for equities.

A 1,600% rise in shares of GameStop in early 2021 first put the spotlight on meme stocks and the retail investors that helped drive many of their rallies as they coordinated in forums such as Reddit’s WallStreetBets. Though many of those initial rallies have since sputtered, meme stocks have seen a number of short-lived rebounds since then, often coinciding with resurging risk appetite in broader markets.

"When we get a little bit of easing in inflation expectations … risk appetite comes back on and retail investors tend to pile into [meme stocks] in hopes of this lottery-like payoff," said Garrett DeSimone, head of quantitative research at OptionMetrics. "The rally in risk assets has carried meme stocks in its wake," said Jason Benowitz, senior portfolio manager at CI Roosevelt.Analysts at Vanda Research noted that January and February tend to be among the strongest months for retail inflows.

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