Credit & Capital

Could GameStop Short Squeeze Affect the Overall Stock Market?

“There’s definitely some excessiveness out there right now, which has some professionals scratching their heads.”
Lauren MuskettJanuary 26, 2021

Short squeezes in GameStop and others like the clothing retailer Express has seen a frenzy of late due to internet message boards, but is it possible that such volatility may end very badly for the wider market? Analysts and experts are presenting a mixed picture.

Blast from the Past: BTIG head of equity and derivative strategy Julian Emanuel said the present situation is reminiscent of the tech bubble crash in 2000, CNBC reported.

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“We don’t see any signs yet, concrete signs, of a medium-term trading top, but this type of volatility leads us to believe that similar to 1999 to 2000, you could get a 10% to 15% pullback at any time,” said Emanuel.

Scott Redler, a partner at the online financial media network, said that the internet frenzy is targeting “names that are most shorted, to create one last squeeze,” as per CNBC.

“There’s definitely some excessiveness out there right now, which has some professionals scratching their heads,” said Redler.

David Wagner, portfolio manager at Aptus Capital Advisors said, “I would have bet my first-born male that GameStop would not be trading at the levels it’s trading at now,” Bloomberg reported.

Gambling and Investing: Loop Capital analyst Anthony Chukumba had a warning for retail investors on GameStop, according to Yahoo Finance. “If you want to gamble, go to the casinos. This is not what the markets are for.”

“It blurs the line between gambling and investing,” said Greg Taylor, chief investment officer at Purpose Investments, according to Bloomberg.

“When you’re divorcing fundamentals from where stocks are trading, you can do that as long as you’re on the right side of the trade. But when the trends change, you have to get off fast,” said Taylor.

Ignore the Sideshow: Former hedge fund manager and CNBC host Jim Cramer said while short squeezes are “entertaining” they are not enough to bring down the market.

“This stuff is ultimately a sideshow, At the end of the day, I don’t think a Reddit forum can bring the house down,” said Cramer, CNBC reported separately. “With the exception of a handful of gigantic tech plays, there isn’t a stock out there that’s big enough to bring down this market.”

Cramer’s take comes ahead of the earnings release of titans such as Apple, Tesla, and Johnson & Johnson this week.

This story originally appeared on Benzinga.

© 2021 Benzinga does not provide investment advice. All rights reserved.