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Is the cashed up Reddit army forming for a new charge?

With US$1,400 stimulus cheques in the mail to millions of Americans, the cashed up Reddit army looks poised to strike again.
The post Is the cashed up Reddit army forming for a new charge? appeared first on The Motley Fool Australia. –

young woman sitting cross legged with large tub of popcorn and surprised facial expression

You may have heard that our counterparts in the United States are about to receive some fat cheques in the mail, courtesy of Uncle Sam. It’s all part of the US$1.9 trillion (AU$2.5 trillion) pandemic recovery bill US President Joe Biden managed to get through Congress. And it will see every eligible person (those making less than US$75,000 per year individually or couples making up to US$150,000 per year) receive a stimulus cheque of US$1,400. If your kids or dependent parents live with you, they get a US$1,400 cheque too.

While similar measures haven’t been embraced by the Australian government, come tax time many Aussies will see a big lift in their tax refunds.

Many analysts are predicting this could be the fuel that ignites the next retail army trading craze.

Cheques set to pour into shares

As Bloomberg reports, Sam Stovall, the chief investment strategist at CFRA Research says the government stimulus cheques “could offer a short-term ‘shot in the arm’ to a market that was otherwise looking run-down and vulnerable to a sell-off.”

Eric Liu, co-founder of Vanda Research, agrees. He said, “stimulus checks will almost certainly drive more retail buying. The social media attention has remained strong.”

A Deutsche Bank survey earlier this month revealed that 50% of individuals in the 25–34 age range who have brokerage accounts expect to use half the money from the stimulus cheques to buy shares.

Twenty-eight-year-old actress, Iyana Halley, falls right into that category. She says (quoted by Bloomberg):

I probably will take about half of it to invest into stocks… I want to see what will make the most sense, where I can get the most out of my money. I’m still new to the stock-market world, so trying to figure stuff out.

She said she uses guidance from trusted friends and social media to help decide which shares to buy.

That kind of investment attitude has Kimberly Woody, a senior portfolio manager at GLOBALT Investments, sounding a cautionary alarm. According to Woody, “you could say it’s like gasoline on a fire. [It’s] participation from a lot of folks that really just don’t know what they’re doing.”

Wise words…

GameStop stalled…but not out yet

Now the new wave of cashed-up Reddit traders hasn’t hit the GameStop Corp. (NYSE: GME) share price yet. Perhaps the loose collective of retail trader will find another share to target. Or not…

Yesterday, overnight Aussie time, GameStop shares plummeted 16.8% to US$220.14 per share. In after-hours trading, shares are down another 1.2%.

That’s a big daily loss. But it’s not even close to erasing the meteoric gains GameStop enjoyed this year. Over the past month, shares are still up 345%. And since the beginning of 2021, the GameStop share price is up a stellar 1,176%.

Where will the Reddit army deploy next? Stay tuned.

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Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The post Is the cashed up Reddit army forming for a new charge? appeared first on The Motley Fool Australia.

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