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CommentApril 1 2021

Is a retail wave really shaking up Wall Street?

Recent activity in the US stock markets has prompted much sound and fury, but the long-term impact is so far unclear.
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There is no disputing that there has been a surge of new individual investors participating in the US stock markets in recent years. In particular, the pandemic, with its enforced time at home and government stimulus cheques, has increased the allure of equity trading for many Americans. Although they remain a small share of the market by value, they approached a quarter of trading activity by number of shares in recent months.

The events around the share price of GameStop are what has really thrust the idea of a retail investor surge into the spotlight. It is a safe bet that many people had all but forgotten about GameStop three months ago, as it went from being one of the world’s largest video game retailers to facing financial difficulty in recent years. Now the Texas-based video games retailer has become synonymous with soaring share prices and a social media-stoked rally with the explicit aim of squeezing short sellers — notably hedge funds known to be short on its stock at the time.

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