This week's meme stock rally differs from 2021. Here's why.

Meme stocks GameStop (GME) and AMC Entertainment (AMC) have spiked in trading after a contributor to Reddit's "WallStreetBets" forum, Keith Gill ("Roaring Kitty"), returned to social media. Could this be another short-lived trend like 2021's meme stock craze, or will this time be different?

Yahoo Finance Reporter Josh Schafer joins Market Domination to share Wall Street insight on the current meme stock rally.

For more expert insight and the latest market action, click here to watch this full episode of Market Domination.

This post was written by Nicholas Jacobino

Video Transcript

Meme stock craze is bad.

Game stop and A MC are soaring again.

But Wall Street says this time may be different.

Joining us now with more on why the surge isn't like that.

2021 meme stock craze is Yahoo Finance's very own, Josh Schafer Joshua.

Yeah, guys.

So that's sort of been the prevailing take from different Wall Street strategy that we've spoken with and just people producing research on the street that we get into our inboxes here, sort of breaking down overall.

It doesn't quite feel like 2021 and there's a couple of data points we can highlight with that.

So Van of research took a look at just retail net inflows that you see into these stocks, right?

And when you take a look at Monday, we saw 15.8 million in the Gamestop, 37.5 million into A MC.

When you compare that to 2021 in the peak of 2021 we saw daily inflows in the Gamestop of 87.5 million.

So that's 87.5 compared to 15.8 million.

That is a big, big difference with A MC we saw about 100 and 70 million and that's compared to 37.5 million.

So quite simply the flows aren't anywhere close to what we saw back in 2021.

And then there's a couple just broader points that people have been bringing up to that I think are sort of rather intuitive to think about here.

One of them just being it isn't 2021 in the world anymore.

And so maybe that's why this isn't going to last longer than maybe the 36 hours that it's meaning 2020 people pandemic stuck at home looking for some fun, not sitting at home hanging out watching that checks and there's not the stimulus checks that just came, it's just not the same environment.

And so when you think about how the maybe plays out in the market again, maybe people don't just have the money to throw at something like this and the time to watch what the money is doing well.

And it's not just about the people who are trading, the retail traders who are trading this, the world has also changed in that hedge funds have wised up at that time.

You know, the Gabe Plotkin of the world were really caught off guard by the force of this, you know, phenomenon.

Now they're following, probably following, at least some of them are, you know, following along with it.

And yes, there were some men who were doing that too.

But they're sort of, they've wised up to the.

Yes.

No, the positions aren't nearly the same.

Right.

For the level of a short squeeze that we saw there just, there isn't that kind of room to run when it comes to that.

And you're right, Julie, a lot of people have been pointing out to if flows are working, how they think right now, hedge funds are probably actually benefiting from this and sort of getting in on the trade.

And perhaps maybe when you look at these stocks now significantly off their highs of the day, maybe already getting out of the trade, right?

Because the stocks move pretty quickly.

And the other thing too, with that is investors maybe have just gotten a little bit smarter too.

We're not seeing the level of leverage in the market that we saw at a time like 2021 or we saw in prior bubbles.

This is something that we've been talking about a lot in the bubble conversation that for some reason we started having over the last two months, but capital economics kept pointing to leverage in the market.

And there's this graph, you see leverage in the market usually shoots up around the.com bubble, it shot up around the great financial crisis and it even shot up in 2021 about in line with where stocks are.

Here's the chart here, your purple line there for a high level, we can call that leverage in the market or people using the trade.

And that is not nearly as closely correlated as the S and P 500 chart.

And so when you take a look at that, it basically is just telling you that level of risk that people were taking in prior moments isn't quite happening right now.

Really interesting.

Probably good.

Yes, probably overall good thing I think for everyone involved.

Thank you, Josh.

Appreciate it.