MONEY THIS WEEK: GameStop, Vaccines, and Stimulus Plan
Weekly Financial Wrap-Up: Learn about what's trending in finance!
The last few days have seen a lot of events unfolding. Here are some of what we think are the most significant current events which have (or may) impact markets worldwide.
The Reddit/Wallstreet battle: The last few days have shed light on the continued battle between Reddit day traders and Wall Street hedge fund investors. The former appear to be collectively targeting stocks shorted by hedge funds to bid up their prices and undermine the latter’s financial positions. Since Tuesday, GameStop shares (GME) have been bid up to unprecedented levels (with a 146.78% price increase). This has led Melvin Capital (a $13bn hedge fund) to close its short position with considerable losses. Other stocks being targeted include BlackBerry Limited (BB), AMC Entertainment Holdings Inc. (AMC), Nokia Corporation Sponsored (NOK), and Bed Bath & Beyond Inc. (BBBY). It is unclear whether the SEC will intervene as the efforts of Reddit traders to bring down hedge funds continue, with mounting accusations of illegal market manipulation.
President Biden’s inauguration and stimulus plan: After a promising inauguration, the 46th president of the United States has begun to implement his plans to revitalize the US economy. Among other things, these have included broadened accessibility to unemployment benefits and food stamps. Furthermore, the Biden administration’s massive stimulus plan of $1.9 trillion to combat the effects of the pandemic on the economy (in face of the persisting high number of unemployment benefit claims) has sparked hope among Americans and world-investors about a steady recovery from the effects of the pandemic upon the economy. Even though the package may suffer from Republican adjustments before it comes into effect, there remains strong optimism about its implementation.
The Federal Open Market Committee meeting: The Fed’s first meeting of the year and its first meeting under the Biden administration comes at a time of worldwide economic turbulence and social turmoil. Faced with the everlasting unfolding of the pandemic and the effect of increasing restrictions around the world, there are growing concerns among investors and institutions about the state of the US economy. In light of this, the Fed is expected to confirm its commitment to its $120-bn-per-month asset purchase programme, implemented in order to alleviate the impact of the pandemic on markets and boost confidence among market players. It is likely this will bring some stability to the strained American and European markets, with stocks falling ahead of the announcement. However, It remains unclear how the programme will be ended, with fears of an abrupt exit in face of more promising economic prospects for late 2021.
Domestic vaccine rollout obstacles and international feuds: With the slow domestic rollout of the coronavirus vaccines suffering obstacles in many of the few countries with access to vaccine supplies, the easing of the pandemic around the world remains a mirage in the future, placing further downward pressure on stock prices and consumer confidence. In addition, a novel dispute between the United Kingdom and the European Union in relation to access to the Pfizer coronavirus vaccine supplies has arisen. The Pfizer vaccine supply, produced within the EU, has come under new restrictions on vaccine exports, threatening its availability to the UK. This could further undermine a swift vaccine rollout in the UK and cause a significant strain on UK-EU relations.
