The GameStop meme stock frenzy returns. Is the Fed to blame?

The GameStop meme stock frenzy returns. Is the Fed to blame?
Fed chair Jerome Powell "fumbled on the five-yard line with the game on the line,” according to billionaire Stanley Druckenmiller. Credit: SHAWN THEW/EPA-EFE/Shutterstock
  • GameStop is up almost 160% since Friday.
  • Could the return of meme stocks have to do with Federal Reserve policy?

GameStop has soared roughly 158% since Friday — perhaps heralding the return of meme stocks.

On Wall Street, the rally is raising questions about the wisdom of the Federal Reserve’s recent policy decisions.

“If retail is in this mood, a lot can happen, but it probably does mean that the Fed pivoted too soon — the reacceleration in inflation is testament to that,” Neil Wilson, chief market analyst at financial-services firm Finalto, told DL News.

Federal Reserve chair Jerome Powell signaled in December that the US central bank expected to lower interest rates in 2024 — possibly cutting rates as much as three times.

Inflation numbers have stubbornly beat expectations since then.

“[Powell] goosed the market with the Burns-like capitulation in December,” Wilson said, referring to former Fed chair Arthur Burns, who let inflation run wild in the 1970s. “Financial conditions have loosened a lot and we have record highs again and meme crap back on the table.”

Wilson’s words were echoed by billionaire investor Stanley Druckenmiller, who told CNBC last Tuesday that he was “perplexed” by the Federal Reserve’s December statement.

“It seemed to me the Fed was in a perfect position — inflation was coming down, financial conditions were tightening — and to some extent I feel like they fumbled on the five-yard line with the game on the line,” he said.

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Druckenmiller said he had expected Powell to take that kind of stance in March or April. “Instead they set financial conditions on fire again. Bitcoin — it went from $30,000 to $70,000 — equities obviously, credit, interest rates.”

Crypto traders, meanwhile, are observing the GameStop frenzy with hope. The return of meme stocks may be a sign that retail participants are paying attention to markets again — and that they could rotate into crypto quite soon.

“The last time GameStop topped after its giga rally, Dogecoin 100x’d in three months,” crypto trader Zion Thomas wrote on X.

Better known by his pseudonym Ansem, Thomas is credited with flagging smart calls to 400,000 followers. He notably touted Solana during its 2022 lows as well as dogwifhat during its early days. Both have soared since.

Tom Carreras is a markets correspondent for DL News. Got a tip about GameStop? Reach out at tcarreras@dlnews.com

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