Social media-led ‘stock frenzies’ warning

31 January 2021

Clients are warned to exercise the utmost caution before joining social media-led “stock frenzies”, according to deVere CEO Nigel Green.

Green’s warning follows a number of retail investors promoting stocks on Reddit, including GameStop, AMC, Pearson, Blackberry, Nokia and Cineworld, with the aim of squeezing short sellers that have been betting against them.

Green says GameStop’s has seen its stock price surge nearly 700% over the past two weeks, while Blackberry is up 185%. He adds: “I would urge investors to exercise the utmost caution before joining social media-led stock frenzies of this nature.  The valuations can be expected to be extremely wild – in both directions – and there’s a legitimate risk that investors could get burned.

“This is being pitched as a battle-play of Wall Street or The Square Mile versus The Little Guy.  However, this is not typically the way reasoned, savvy investors should strategise to create and build their portfolios in order to reach their financial goals. This is a dangerous game to play for retail investors.”

Earlier this week, Green said investors should not be wary of the macro-bubble but the potential bursting of bubbles within specific stocks.

Green adds: “Micro-bubble spotting, and diversification across asset class, sector, region and even currency, should become a priority for investors right now. I would avoid being drawn into the hysteria driven by social media.”

Professional Paraplanner