The wild trading saga surrounding GameStop Corp. and other meme stocks targeted by bands of individual investors ostensibly out to prove a point, rather than make a profit, could signal an important change in the way parts of the market function — or, more precisely, don’t function, warned a veteran market analyst.
“As a result, volatility would beget volatility in certain markets, leading to wildly mispriced assets,” he said. Some short sellers took painful hits and the resulting “squeeze” sent ripples through the stock market as hedge funds moved to decrease leverage. But other hedge funds also made a killing, joining in the ride higher. And some individual investors who joined the party late suffered steep losses when shares fell back to earth.
It’s also prompted discussions over the role of individual investors, who have shown renewed interest in the market. “Noise traders” aside, many analysts see this new cohort of market participants as more savvy than past generations, with less propensity to chase returns.Also see: A new wave of fearless retail investors could be ready to pour $170 billion into stocks, says Deutsche Bank
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hug the bear and buy!