Speculative Trading Is Only One Reason Why Market Volatility Is High01/29/2021

Share:

Latest - Insights Latest - Insights Latest - Insights Latest - Insights Latest - Insights

U.S. equities continued their roller-coaster ride today on concerns around speculative trading by retail investors. Recently, the stock market has been led by stocks with the highest percentage of short interests, or investors betting against them. As a reminder, short selling is when an investor borrows shares and immediately sells them hoping to buy them back later at a lower price. If an investor can borrow and sell a stock at a cheaper price than they bought it, they can profit. The fear for financial markets is that if the heavily shorted companies continue to rise in such a volatile fashion, it causes a short squeeze forcing hedge funds and other investors who bet against these companies to sell other securities to raise cash for margin requirements needed to borrow stocks. A short squeeze happens when a group of investors, looking to cover their short positions, start buying at the same time. This has been the primary driver in the performance of these stocks which have large short interests. These forced sales by hedge funds, combined with fears this speculative mania may be an indication of a larger market bubble that it is unraveling, could also cause significant market turbulence.

For more insights, download our full commentary.

Latest - InsightsCIM Commentary - Speculative Trading Volatility.pdf Latest - Insights

Commentaries are published by Cetera Investment Management LLC, an SEC registered adviser owned by Cetera Financial Group. Cetera Investment Management provides market perspectives, portfolio guidance, model management, and other investment advice to its affiliated broker-dealers, dually registered broker-dealers and registered investment advisers.

Latest News - Latest Insight Detail - Subscription

Want more insights like this, sent straight to your inbox?

Subscribe to email updates from Cetera and be well informed about what’s happening within the market and the financial services industry overall.

Drop Us a Line

Looking to be part of something more? Get in touch to learn about the benefits of affiliating with Cetera and start taking the next steps to a stronger future.


Account Assistance

If you are a client of a Cetera-affiliated financial professional and need assistance with an existing account, please reach out to your financial professional directly. If you’re unable to reach them, use our direct support lines listed below.

Join the Community

If you’re a financial professional interested in learning more about affiliating with Cetera Financial Group, please complete the form.