WallStreetBets Is Disrupting Financial Markets — Possibly Permanently

For others, WallStreetBets represents an opportunity to exploit and expose weaknesses in the financial markets. Others, though, are competent investors.

Whatever the goal pursued, the beliefs and risky behaviour of this new breed of retail investors are a far cry from those that often characterize typical stock market investors, many of whom heed financial advisers and favour long-term investments in safe opportunities like blue chip stocks, mutual funds or, for the riskier investor, exchange-traded funds, or ETFs.

These contrasting beliefs are the topic of many humorous videos and memes.


Retail investors gaining influence

Until now, retail investors have usually been the customers of financial institutions. Institutional investors, such as large banks and hedge funds and their wealthy clients, were traditionally seen as the “smart money” who influence the movement of markets. Smart money is typically portrayed as involving successful, respected investors who possess important knowledge of financial markets.

In contrast, WallStreetBets’ members are known for the self-deprecating ways they describe themselves, typically as “yoloing” cuckolds and degenerates, painting a clear contrast to the supposedly respectable smart money investors. Yet this influential group comprises “100s of mini Mike Tysons” who together yielded enough power to cause billions of dollars in losses to established financial firms.


Reactions by finance professionals

Whether they’re fashion houses or record companies or hedge funds and wealth management companies, people in power typically try to undermine the threat posed by market transformations that could upend their business model and minimize their influence.

In the financial world, reactions to WallStreetBets have been varied. Trading platforms have tried to curb the power of Redditors by limiting transactions under the rationale of protecting consumers. Many analysts and investors have also derided WallStreetBets investors as uneducated people who might lose their shirts on their bets.

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Disclosure: This article is republished from The Conversation under a Creative Commons license.

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