Having been around a year since GameStop’s (GME) stock gained notoriety through the infamous short squeeze, “meme stocks” continued their rise to prominence throughout 2021 and remain at the forefront of investors’ minds today. According to data collected in a recent Charles Schwab (SCHW) Trader Sentiment Survey, the majority of investors believe meme stocks still have the ability to move markets this year.
“When asked if meme stocks are likely to have an impact on markets in 2022, 65% of traders said it’s likely — with 40% saying somewhat likely and 25% saying very likely,” the survey reads. “If there is another meme stock trading event this year, 30% of traders indicate an appetite to participate.”
Of the 70% of traders who said that they would not participate in a 2022 meme stock event, 10% indicated that they had participated in the 2021 frenzy, while 60% said that they did not. In any case, the survey found that last year’s meme stock event had a significant impact on trader behavioral outcomes.
In light of the events of 2021, the survey found that 35% of respondents said they became more aware of their risk tolerance and would factor that in before making future momentum-based trades. On top of this, 22% noted that they became more careful about the sources they use to conduct their investment research and 21% said they now conduct more research before making trades.
The Charles Schwab Trader Sentiment Survey is a quarterly study exploring the outlooks, expectations, trading patterns and points of view of active traders at Charles Schwab and TD Ameritrade (TD). The study defines an active trader as those making more than 80 equity trades, more than 12 options trades, or those who make futures or FOREX trades over the course of the year. This survey included 728 active trader clients at Charles Schwab and TD Ameritrade between the ages of 18-75 and was fielded from Jan. 5-16, 2022.
The rise of the retail investor
According to Barry Metzger, head of trading and education at Charles Schwab, the education of new traders is another major legacy of the meme stock phenomenon.
“An influx of traders may have come to the market for meme stocks, but many have stayed and learned about the importance of doing their own due diligence, the value of third-party research, and how to utilize institutional-like trading tools and resources,” Metzger said in the report. “Many have achieved greater balance in their portfolios as a result of this engagement.”
Indeed, retail traders continue to be a driving force in markets, playing a large role in the recent slump and reversal. Amid the rise of meme stocks like AMC (AMC) and new trading platforms such as Robinhood (HOOD), retail investors often “buy the dip,” acting as a balancing force on the overall market.
“The power of the public or the power of the retail investor has never been stronger, right? And we’ve learned that through that short squeeze event,” Webull CEO Anthony Denier told Yahoo Finance Live. “We’ve also learned that our market system and our market structures are inefficient.”
