“YOLO – You Only Live Once”. The rallying call of Roaring Kitty, key instigator of the WallStreetBets Reddit movement.
After the action-packed final few months of 2020, with the US election, Brexit and COVID-19 vaccine hopes, many were anticipating quieter newsflow in the New Year… however the Reddit community had other ideas, taking Wall Street by storm and catching hedge funds completely off guard. The WallStreetBets Reddit thread community has probably even surpassed their own expectations, with their rampant short squeeze via buying shares and call options in US video games retailer GameStop resulted in the stock trading from $4 six months ago to peaking at almost $350 at the end of January, a rise of over 8500%. For a bricks and mortar retailer, where its primary product can be downloaded directly onto video consoles, the move is extraordinary. The Redditors haven’t just been focused on GameStop, but also AMC, Cineworld, Nokia and Blackberry have all been bid-only and seen prices climb rapidly. All these businesses have short positions against them, resulting in a sharp bout of volatility as hedge funds have to raise money from their long books, as their short books unravel, depressing the market. It will be interesting to see where the movement goes next, but as I write, the commodity, Silver is catching the fever. Let’s hope we avoid a repeat of Nelson Bunker Hunt and the Silver Thursday crisis of 1980…
Encouragingly, the COVID-19 vaccine roll-out has continued in abundance, with Johnson & Johnson and Novamax both being approved in the UK after successful trials. The UK rollout has been impressive; at the time of writing, over 10% of the population have received their first dose, with the rate of inoculations continuing at pace.
After a bullish start to January, this market volatility imposed itself on the FTSE 100, which closed the month -0.8% (having been up as much as 6% in the early part of the month). In comparison, the S&P 500 closed off 1.1% and the EuroStoxx 50 off 2% month to date.
In this month of two-halves, the miners and oil & gas names led the way before paring back. The Consumer Discretionary and Staple Goods names remained soft but, as more and more vaccines get approved and more and more citizens get vaccinated, their fortunes will improve. Fingers crossed it won’t be before too long that we are all back travelling, staying in hotels and doing our best to prop up the hospitality industry at home and abroad.