Latest / DEEP INSIGHT / How GameStop Mania Changed The Stock Market

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How GameStop Mania Changed The Stock Market · DEEP INSIGHT

• 0:00
  Speaker 1: Five years ago, retail investors betting on GameStop were derided
• 0:03
  Speaker 1: as dumb money. The events were synonymous with stock market gambling.
• 0:07
  Speaker 1: Consensus on Wall Street was that most individual traders would
• 0:10
  Speaker 1: retreat after COVID, but those assumptions have been proved wrong.
• 0:14
  Speaker 1: Average investors are now outperforming the market and becoming much
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  Speaker 1: more influential than many predicted. Professional traders have been forced
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  Speaker 1: to pay close attention to retail traders who are now
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  Speaker 1: influencing market structure and fueling the rise of new asset classes.
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  Speaker 2: Look at how retail is perceived now. They were a
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  Speaker 2: dominant force in the industry.
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  Speaker 3: They were actually very savvy. They bailed out the market
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  Speaker 3: during COVID, and they bailed it out again during the
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  Speaker 3: tariffs like they were aggressive buyers.
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  Speaker 1: Here's how retail investors went from a market side show
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  Speaker 1: to a force. Wall Street can no longer ignore. GameStop
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  Speaker 1: was a truly unique event in Wall Street history. Brought
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  Speaker 1: an unprecedented level of attention and volatility to the stock market.
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  Speaker 1: Millions of people rushed to get a piece of the
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  Speaker 1: action with game stop shares and options, which pushed the
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  Speaker 1: stock up by sixteen hundred percent that first month. Of
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  Speaker 1: twenty twenty one, the market movement crushed some hedge funds,
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  Speaker 1: and as the price jumped, short sellers then had to
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  Speaker 1: buy back the stock to cover those losses, which created
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  Speaker 1: what's known as a short squeeze.
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  Speaker 3: Institutions became afraid of retail during game stop for good reason.
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  Speaker 3: You know, there there's strong power and numbers in retail.
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  Speaker 3: That kind of opened all the institution's eyes as to
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  Speaker 3: the importance of retail.
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  Speaker 1: While game stops certainly poured fuel on this trading boom,
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  Speaker 1: there were some structural changes that had paved the road
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  Speaker 1: for this trading frenzy. Just two years earlier, the entire
• 1:37
  Speaker 1: industry had dropped commissions to zero, pioneered by Robinhood, making
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  Speaker 1: trading essentially free. A few decades ago, think about commissions,
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  Speaker 1: they were closer to one hundred dollars. By twenty twenty.
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  Speaker 1: Most brokerage firms had added the ability to trade fractions
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  Speaker 1: of a share That meant you could buy in dollar
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  Speaker 1: amounts versus needing to have thousands of dollars to get
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  Speaker 1: access to your favorite tech stock, and there were largely
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  Speaker 1: no account minimums.
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  Speaker 3: To really kind of open the door and getting rid
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  Speaker 3: of all the barriers for basically anybody.
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  Speaker 1: On an average day, Retail investors are now making about
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  Speaker 1: twenty percent of daily market volume. Flash back to before
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  Speaker 1: COVID that was in the low single digits.
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  Speaker 3: According to Blackrock, people had an assumption that once COVID
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  Speaker 3: cleared up and everybody went back to their daily lives
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  Speaker 3: in whatever form that is, that this retail participation would
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  Speaker 3: subceed and go back down, and you know, everybody would say, oh,
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  Speaker 3: you go manage my money. What maybe has surprised me
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  Speaker 3: a little bit is how strongly it's it's continued. Because
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  Speaker 3: ten years ago you had periods where the equity participation
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  Speaker 3: by retail customers was maybe ten percent. Now you can
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  Speaker 3: see instances Word's.
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  Speaker 1: Forty Regail investors have now diversified well beyond meanstocks.
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  Speaker 2: Many people for the first time in their lives took
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  Speaker 2: an interest in the market and took an interest in
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  Speaker 2: the different tools in the market. And I don't want
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  Speaker 2: to downplay that people did lose money, but what it
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  Speaker 2: did also lead people to is to get educated and
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  Speaker 2: to understand how the market can use to create wealth.
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  Speaker 1: Retail investors first change their strategies as interest rates shot
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  Speaker 1: up and drag down chairs of widely held tech companies.
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  Speaker 1: They flock to interest bearing products, and they have been
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  Speaker 1: powering the stock market and some of the downturns we've
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  Speaker 1: seen with outsized appetites to buy into selloffs.
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  Speaker 2: That oh, dumb money moniker, you don't hear it so
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  Speaker 2: much anymore because the professionals have certainly learned a lesson
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  Speaker 2: from the tenaciousness of the retail investors who believe in
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  Speaker 2: companies that are good companies and continue to buy them.
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  Speaker 2: We graduated to Meta Apple, any of the mag seven,
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  Speaker 2: and when they start to suffer, you often see the
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  Speaker 2: retail investor be the first one to lead the charge.
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  Speaker 3: They're twenty nine years old, so if keep's going down,
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  Speaker 3: they'll buy more. Like you know, they know that over
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  Speaker 3: the course of the next forty years there's probably gonna
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  Speaker 3: be an average of nine to ten percent return, and
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  Speaker 3: they're gonna they might have five years where they don't
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  Speaker 3: get it, but in the long run, they're going to
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  Speaker 3: get it.
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  Speaker 1: The Magnificent seven stocks have also helped drive retail portfolios
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  Speaker 1: and help them beat the market. Pallenteer is a widely
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  Speaker 1: held name. It drove out performance last year, saying with Nvidia,
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  Speaker 1: they've also been rushing into commodities lately, especially gold and silver,
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  Speaker 1: where inflows hit new records this year.
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  Speaker 4: I think the post twenty twenty world looks a lot
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  Speaker 4: like it did in the nineties to me, which is
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  Speaker 4: at retail investors actually are really good at fleshing out
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  Speaker 4: good growth stories and then they can do it with
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  Speaker 4: size and conviction, and they are difference makers, you know.
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  Speaker 4: And we've seen it today in the mean stock world
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  Speaker 4: or the post game stop world. A lot of ideas
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  Speaker 4: are socialized on either Reddit or x. A lot of
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  Speaker 4: our institutional investors now follow Twitter and Reddit closely, and
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  Speaker 4: they're employing AI agents to monitor activity and conversations.
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  Speaker 1: Wall Street is paying attention and starting to tailor offerings
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  Speaker 1: to this group of active traders. They've been rushing to
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  Speaker 1: offer more access to cryptocurrencies and crypto ETF's prediction markets
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  Speaker 1: are boomy, and brokerage rooms are now rushing to offer
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  Speaker 1: twenty four hour trading, a structure made popular by cryptocurrency
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  Speaker 1: markets which trade overnight and on the weekends. There has
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  Speaker 1: been a boom in private market offerings for average investors
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  Speaker 1: to get a slice of this AI boom in Silicon Valley,
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  Speaker 1: and there have been worries though about the staining power
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  Speaker 1: of this group. It's all great in a bull market,
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  Speaker 1: but what does it mean in a prolonged downturn.
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  Speaker 2: We will at some point have a down move that
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  Speaker 2: will discourage some people, but I don't think it's going
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  Speaker 2: to discourage as many people as it has in the past.
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  Speaker 2: Downward moves make people more cautious, They lose money, they
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  Speaker 2: don't have the discretionary brokerage account that they did at
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  Speaker 2: one time. It will happen, but after a year or
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  Speaker 2: two those things start to settle down and people go
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  Speaker 2: back to things they were doing before.
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  Speaker 1: More sophisticated and riskier products like options and leverage ETFs
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  Speaker 1: have also become a lot more widely available. These instruments
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  Speaker 1: provide more risk, but also outside returns. In some cases,
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  Speaker 1: they also offer the ability to add more downside protection.
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  Speaker 4: A lot of derivative products, whether it's short data calls
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  Speaker 4: or call spreads or call put spreads, which were only
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  Speaker 4: used by institutions, are now available for retail investors, and
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  Speaker 4: in some ways that is a tool, but it does
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  Speaker 4: require skilled driving. I mean it's like today almost anyone
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  Speaker 4: can now drive a ferrari of financial markets and so
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  Speaker 4: it can be quite dangerous, but of course in the
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  Speaker 4: right hands it can amplify returns.
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  Speaker 1: Wallstreet also has a multi trillion dollar reason to pay attention.
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  Speaker 1: Younger retail investors are set to inherit record wealth passed
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  Speaker 1: down from baby boomers to millennials and gen Z.
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  Speaker 4: About one hundred and twenty trillion in the next twenty
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  Speaker 4: years will be inherited to the millennials and gen Z.
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  Speaker 4: That's four times the size of the US economy.