COULD MEMESTOCK REPEAT?

Published: 2022-01-28 01:21:15 ET GME

OR THE retail investors at the heart of it, the memestock surge last January was a case of David vs Goliath. A ragtag bunch of amateur investors, feverishly coordinating on online forums, piled into ailing stocks like Gamestop and sent share prices soaring.

This sent shockwaves through the financial system and brought hedge behemoths to their knees as their short positions took a pummelling.

But a year on and retail investment has, to an extent, settled and adapted; some safeguards have been put in place, the humbled hedge funds have lived on.

So could a memestock surge happen again?

Robinhood, the retail trading app at the heart of the surge, clamped down at the height of the trading frenzy to uproar from retail investors, who accused it of taking the side of the institutions.

The firm released a blog this week reflecting on the various measures it has put in place since the "extraordinary market activity" including doubling down on financial literacy and helping people learn the basics of investing.

But Lee Wild, head of equity strategy at retail trading platform Interactive Investor, says the appetite is still there.

"Gamestop captured the imagination of investors who were prepared to take greater risk in the pursuit of potentially significant profits. Many Gamestoppers also own Tesla, so have experience of both identifying and owning spicier stocks".

With this appetite still simmering, institutions are now casting a vigilant eye across retail investment to spot the surges at source before they mutate into something more dangerous.

Vanda, a trading data firm, last year launched a proprietary data set tracking

US retail investment and has seen demand surge from institutional clients.

"If you're looking at US equities now, you have to have a retail outlook," says Angus Hume, chief executive officer of Vanda. "Every major rotation in the market has been sponsored and driven by retail investors."

JP Morgan too has reportedly rolled out a through-the-retail-lens tool to help hedge funds spot the next surge.

The tool launched in September and is being used by about 30 asset and quant fund managers, Bloomberg reported, and gives a view of retail flows and combs through Reddit and Twitter.

In the US, the Securities and Exchange Commission is looking to put rails in place and prevent the worst impact of another retail revolution.

The safeguards have for the time being fought off a retail revolution. But only time will tell where the next will come from.

Every major rotation in the market has been driven by retail investors