What effect might newbie investors, “meme stocks”, Robinhood and many others have on the market?
According to Citi analysts, the market which has been advancing for most of the year is likely to undergo a correction, and this is largely due to inexperienced investors.
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In a note to clients, Citi said that “too many inexperienced investors are embarking on tech ideas that appear to be overvalued at 20 times the income, complaining that the often older investment community does not understand the ongoing disruption. and is too handicapped by traditional measures, ”reports CNBC. .
It is not difficult to understand who they are talking about. The 2021 “memes stocks” phenomenon will become one of the most bizarre and volatile in trading history. Social media platforms like Reddit have fueled massive increases in stocks like GameStop and AMC that were otherwise expected to lose money this year, but have instead grown five, ten and sometimes 20 times in value. Frantic trading has been made easier by the ease and relatively loose restrictions of trading platforms like Robinhood. Used primarily as an app on a smartphone, with just a few taps, teens and others with little trading experience received their trading guidelines from social media. Trading has been halted several times on the platform as the movements made en masse resulted in the forced stopping of trading due to too much volatility.
Citi says this unusual activity could see a “very plausible” 10% correction. A correction refers to a fall in value or price. Traders use this term when they believe that a market or segment is overvalued or overvalued in price, therefore requiring a “price correction” to return to what they consider to be a normal level. In this climate, such a drop would bring the S&P to around 4,000, which is Citi’s year-end target for the index, CNBC adds.
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Although Citi sees a correction suggesting an easing of the storm behind the frantic trading, Bank of NY Mellon believes otherwise. They say that with the stimulus checks deposited in the bank accounts of hundreds of millions of Americans, many analysts expect the trade craze to continue. Whether or not they were at their peak, the frenzy sparked many new investors interested in ways they had never experienced before – which could mean they’re here to stay and could transform the business landscape for good.
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Last updated: August 6, 2021
This article originally appeared on GOBankingRates.com: What effect might newbie investors, “meme stocks”, Robinhood and more have on the market?