The GameStop shock – and why it might be the turning point for financial literacy

By Sandy Downs on Thursday, 28 January 2021

It’s the lead story across the FT, The Times, The Metro, Twitter, and Reddit. Rarely does a story have such universal appeal… especially when it’s about hedge fund shorts.

Millions of Redditors have become day traders in the space of a few weeks, with r/WallStreetBets’ 4.3 million followers being encouraged to buy stocks to raise the price of GameStop. The hedge fund which had shorted the stock lost billions, and has now declared bankruptcy, and Redditors are on the hunt for opportunities to do the same again.

Reactions are divided. Hedge funds are fuming, and are now calling on the White House to step in and stop day traders from influencing the market – quite the 180 for the famously ‘free market’ capitalists. I’m sure the FT will have stories for weeks on the ramifications for policy, regulation, and hedge fund capital management.

But many are in favour of the Redditors. Stories about people paying off medical bills, pet surgery, and housing deposits are going viral – and we could even see a boost to GDP from this, in the absence of the long-awaited US stimulus checks. Each post on Reddit is getting upwards of 20,000 likes, and even Fox News Business has come out on their side, with Charles Payne saying ‘the shorts have had their way with the market for decades, and no one has ever complained about that. I am thrilled that individual investors are playing the same game, and now you (big hedge funds) are losing.’

But beyond the issue at hand, I’ve got a close eye on what’s happening on Twitter and TikTok off the back of this too. Viral posts are dotting up all over the place to try to explain the situation to those who have likely never interacted with the stock market before. This Twitter post is one, and TikTok is flooded with videos offering quick visual explanations of what stocks are, how to start investing, different saving products, and how to decide on your risk profile.

I genuinely believe this might be a turning point for financial literacy, no matter how small. Millennials are sitting on a huge amount of wealth, but also startling distrust of financial systems, having lived through two global recessions already. This might be the excuse many need to dip a toe into the world of investment… and while it might not be the well-researched long-term risk-adjusted investment strategy that we’d like, it could well start a conversation which leads to real, tangible change.

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