The rampage of the Reddit bulls has made more conventional investors take cover. America’s S&P 500 had its worst week since October, closing down 1.9% last Friday. Perhaps most tellingly, the CBOE VIX volatility index, the stockmarket’s “fear gauge”, registered its biggest weekly gain since June last year. The index had stayed beneath 25 for most of the period since Biden’s election victory, but finished last week at 32.4.
For many institutional investors, the spectacle of “retail investors piling into particular stocks” and pushing prices to absurd levels brings back uncomfortable memories of the dotcom bubble, says Rupert Thompson of Kingswood. The drama helped global shares lose almost 4% last week, erasing their gains for the year so far.
The “skirmishes” between hedge funds and Reddit’s “vengeful legions” may have seized the headlines, but financially speaking the whole thing is a rounding error, says Cormac Mullen on Bloomberg. The shares being shorted in the likes of GameStop and other hedge-fund targets amount to “less than 0.001% of the $43trn stockmarket”, according to figures from Barclays. Yet with US equity valuations so high, anything that makes people forget their “greed and fear” and consider “prudence” is salutary.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Markets have hit their first bout of turbulence of the year, but most are clinging onto January’s gains. China’s CSI 300 is up by 4.4% so far this year, while America’s S&P 500 has climbed more than 3.5%. The major laggard has been Europe, where Germany’s DAX has gained just 0.7% for the year. After a strong start the FTSE 100 is marginally down. Therein lies opportunity: British stocks, as MoneyWeek often points out, are trading at a discount to their global peers, and are worth scooping up.
-
8 of the best houses for sale with annexesThe best houses with annexes – from a period property in the Lake District to a 13th-century house with a two-bedroom annexe in Saltwood, Kent
-
Zelenskyy moves to appease Donald Trump – what happens now?Ukraine’s president Volodymyr Zelenskyy is conceding ground to secure the least-worst deal possible, says Emily Hohler
-
Rolls-Royce stock jumps 15% – could it climb further?Aircraft-engine group Rolls-Royce’s CEO has been hailed as a hero for spearheading the firm’s recovery. And the future looks bright, says Matthew Partridge
-
The power of private marketsInterview Helen Steers, co-manager of the Pantheon International investment trust, tells MoneyWeek about the vast array of compelling opportunities in private equity
-
Vertex Pharmaceuticals is an uncommon opportunity in rare diseasesVertex Pharmaceuticals operates in a profitable subsector and is poised for further success
-
Global investors have overlooked these top tips in emerging marketsOpinion Chris Tennant, co-portfolio manager of Fidelity Emerging Markets, picks three attractive companies in emerging markets
-
King Coal has not been dethroned yet — should you buy?The demand for coal is only growing, yet investors don’t seem to want to take advantage of the opportunity, says Rupert Hargreaves
-
It’s time to start buying Europe again, says Merryn Somerset WebbOpinion Europe's stocks are cheap and the economic backdrop is starting to look cheerier, says Merryn Somerset Webb
-
Prosus to buy Just Eat for €4.1 billion as takeaway boom fadesFood-delivery platform Just Eat has been gobbled up by a Dutch rival. Now there could be further consolidation in the sector
-
Should investors stay bullish and buy UK and US stocks?Opinion Ignore the Eeyores, says Max King. The outlook for stocks in both Britain and America remains auspicious
