May Markets: A Return to Lunacy
May 17, 2024
The U.S. stock market experienced a return to 2021’s Gamestop & AMC mania, with both stocks moving wildly this week. The week began with major surges; AMC traded in the double digits at one point, well above Friday’s $4.40 close. Closing Friday down 19.73% and 5.17%, respectively, Gamestop and AMC ended the week much calmer than they started it. Regardless, the pop in prices that the stocks experienced are significant developments indicative of a complete disconnect with the actual businesses these corporations run.
In 2021, organized through a Reddit community called “WallStreetBets,” retail investors successfully orchestrated a major short squeeze on institutional investors who had heavily shorted stocks like Gamestop (GME) and AMC. Taking advantage of ridiculously high short interest, retail investors supercharged the stocks forward, and their rise, in turn, forced shorts, in a desperate position, to cover. Both stocks saw rises in the thousands of percent and some retail investors profited greatly while others who joined in late were left holding shares as the stocks decline back down from the stratosphere.
That was 2021. The wild swings in Gamestop and AMC returned this week, with both seeing triple-digit percentage rises in a matter of days. A major influencer from the original mania in 2021, Keith Gill, made a return to social media after years of inactivity, which may have catalyzed renewed activity in the stock. Gill, known as “Roaring Kitty” saw his position in Gamestop become worth millions thanks to the success of the retail trader movement in 2021 and he even testified in front of Congress regarding the Gamestop debacle. While Gill’s return may have excited some, as of Friday’s close, it looked like the spike may have been short-lived, as both stocks had lost a large share of their gains.
The S&P 500 closed above 5,300 to close off the week, which was far more mellow for the index than for Gamestop and AMC. The wild fluctuations in those two companies are an indication, however, that underneath the surface of calm indices, there is some serious volatility in certain pockets. Beyond Gamestop and AMC, many eyes are on Trump Media & Technology Group (DJT), which trades at a multi-billion dollar valuation despite losing money. Ultimately, the Gamestop saga of 2021 may be in for a comeback; how that plays out remains to be seen. Nevertheless, there is certainly a lot of movement going on within certain speculative investments despite calm broader market indices.