Retail traders who lurk in forums like Reddit's WallStreetBets are back to betting against Wall Street pros and the Federal Reserve as rallies for meme stocks like Bed Bath & Beyond and AMC Entertainment Holdings show shades of last year's mania.
The home-goods retailer nearly tripled at one point during its nine-day winning streak while the movie-theatre firm capped a 65pc rally of its own as speculative pockets of the stock market surge. The pair have powered a basket of 37 meme stocks tracked by Bloomberg higher by 10pc over the past week while the most-hated stocks tracked by a Goldman Sachs basket is up roughly 17pc over the same period.
The resurgence of more speculative areas of the market is likely fuelled in part by individual traders’ willingness to jump on riskier trades and bet against hedge funds. A rally in tech shares and other growth stocks at one point on Monday pushed the Nasdaq 100 Index up 20pc from a June low amid alarms from some on Wall Street that the Federal Reserve is set on fighting inflation regardless of the pain for the stock market.
The "smart guys" are "confused, baffled and fighting short positions from a position of weakness in terms of momentum and firepower", said Mark Taylor, a sales trader at Mirabaud Securities. "The lack of real understanding of why a sudden resurrection of the ‘meme-entum’ bid could lead to some nefarious speculation about things being manipulated but what would be as much sour grapes speculation as anything real."
Bed Bath & Beyond's taking of the meme stock baton resulted in a 40pc rally Monday as a record 120.5 million shares changed hands with the stock being the second-most bought asset on Fidelity's platform. AMC Entertainment stock saw trading volume triple what has been normal over the past month.