The average investor is speaking loudly right now in pushing heavily shorted stocks such as GameStop, BlackBerry, Koss Corporation and many others to dizzying new heights.
Their collective message: Wall Street better pay attention to us or else.
Well, Wall Street is starting to listen. But, it’s unclear how the mindsets of professional traders and strategists will be changed by the volatility spike and loss of profits moving forward.
“I will say it’s not as if it doesn’t influence your thinking at all,” said J.P. Morgan Asset Management global strategist Benjamin Mandel on Yahoo Finance Live. Mandel started his career on Wall Street as a financial analyst at Lazard back in 2001. He had stints at the World Bank, Federal Reserve and Citigroup before joining J.P. Morgan in 2015.
Mandel added, “We [Wall Street] need to consider what signals we could be taking from this experience and this recent change. For example, are we in bubble territory is a question we will be asking ourselves pretty regularly over the next while. I think the question on everyone’s mind is this early 2000? Are these indications that we are headed into some type of financial bubble and what the implications if and when we are and if that pops? We won’t think we are at the moment, but that’s something we have to consider as we tactically shift around portfolios. Then I guess more subtly, is this an indication that sentiment for risk is a little bit more fragile? Maybe it’s really not about retail investors, maybe it’s just symptomatic of this idea that risk sentiment is going to be pushed around a little more in an environment where growth is not surging.”
To be sure, a groundswell of vocal and active average investors have gotten the attention of the world.
The surge of retail investors taking on Wall Street short sellers in Reddit chat rooms has sent shares of fundamentally weak, heavily shorted companies through the roof. Shares of movie theater operator AMC are up 230% over the past five sessions. Struggling video game retailer GameStop shares are up 337% in the past five days. Speaker maker Koss Corporation has seen its stock skyrocket more than 1,000 in five sessions.
All three of these stocks plunged on Thursday, however, as brokerage sites such as Robinhood and Interactive Brokers moved to restrict trading in the very hottest names. Despite the sell-off Thursday, Wall Streeters continue to compile notes on the volatility and ponder if the business has changed for good.
“Narrative is going to play a much bigger role in all aspects of finance moving forward,” said O'Shaughnessy Asset Management associate Jamie Catherwood on what he has learned from the investor uprising. “Fundamentals and everything will matter, but I think they [Wall Street] will need to kind of pay heed to what these activists are calling for and change policy accordingly.”
Brian Sozzi is an editor-at-large and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.
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