The massive stock market crash in March 2020 was a direct result of the COVID pandemic, which in its early days made investors completely lose confidence in the stability of the world economy. However, when the market and world economy seemed to cope well with the pandemic, the stocks began rising with bubbles forming specifically around high tech companies such as Tesla, biotech research, AI development, and Amazon, Facebook, and Google. In early 2021, popular social media movements such as the subreddit r/WallStreetBets were attributed to have manipulated “dead” stocks like GME and AMC with low trading volumes and hedge fund shorts.
Similar to the Dot-Com bubble two decades ago, the recent Biotech bubble has involved wealthy investors throwing money at any company that seems marginally related to the growing R&D genetics and biotech industry. Events such as Covid-19 have boosted the investment even further by making vaccine development even more profitable and relevant. From last March to now, the Nasdaq Biotechnology Index has risen over 60% with sector valuations soaring after the IPOs of genetics, biotech, and pharmaceutical companies. Many investors understand the industry as little as they did the internet around 2000, so bad investment decisions could lead to a widely damaging catastrophe when the bubble does pop.
AMC Entertainment, Bed Bath & Beyond, BlackBerry, and GameStop are just some of the few stocks that have been overturning the odds as there was a surge in share trading just recently. It all started when members of the Reddit forum r/WallStreetBets encouraged others on the forum to come together to buy GameStop stock. This started a large influx of share trading for these companies otherwise known as short-sell stocks. Throughout this surge, commission free broker app Robinhood even limited trading for some of these stocks. When the stocks rose, short-sellers had to rush to get out of their bets by buying even more of these stocks at much larger prices forcing the value of the stock higher than ever. The SEC is now investigating this incident for market manipulation.
On November 12, 2020 President Trump signed an executive order prohibiting that would prevent US investors from investing in specific Chinese companies. Trump signed the executive order to prohibit investors from buying into companies that were decidedly linked to China’s government. This law is said to have been implemented due to China’s refusal to let independent firms review audits of companies who trade in the US. Those in support of the bill state that this ensures that all companies abide by the same rules; however, those against it say that it will “undermine global investors confidence in the U.S. market” and therefore hurt U.S. interests.
Overall, the past year in the stock market has been extremely hectic with even Warren Buffett, the oracle of Omaha, not being completely sure about its trends.