I have been having a lot of conversations lately on thematic investing, meme stocks (i.e., stocks that benefit from social media hype), and what is going on in this market. In my view, the memes and the themes are illustrative of the retail investor revolting against Wall Street. In the late 90s, retail investors started flexing their muscles, making a lot of money in dot com stocks. While many pundits try to make parallels between now and then, the situation today is much different. In the 90s, brokers got rich selling their clients on the dot coms. They had all the power, controlling access and information. Then the bubble burst and investors lost money. Wall Street was able to convince retail investors to leave investing to the “professionals” and many of them put all their money into index funds.

Fast forward to Covid. Seemingly overnight, people were stuck at home in front of their computers, and things were moving. Unlike the 90s, retail investors now had the tools to do their own analysis, they could trade for free at lightning speed, and they were connected. They were never taught that stocks move up based on valuations or earnings growth, so they ignored those things. They did learn that short interest is like rocket fuel. They understood that if people were in lockdown, they would be using Amazon, Netflix, and Zoom Video more. Why invest in some stale market cap index when you could play the stay-at-home theme, or the reopening theme, or the meme theme?

Investors who didn’t want to invest directly in stocks migrated towards thematic ETFs. These ETFs generally cover things like Electronic Vehicles, Blockchain, innovative technology, etc. Unfortunately, Wall Street did what it always does, in my opinion: create investments based more on marketing than merit. Many of the thematic ETFs were based on indexes that don’t rebalance frequently enough to stay in harmony with fast-paced markets. They also used fixed metrics to decide what is in the Index; doing so can also result in an inability to keep up with what is going on.

I believe thematic ETFs need to be more agile, but they are not going anywhere. Neither is the retail investor. They have power now, and people who end up with power don’t give it up without a fight. Ignore their influence and ignore the trend into thematic investing at your peril. I’m concerned this latest move in the meme stocks won’t end well for everyone. Greed and fear often dominate all market activity, causing stocks to go up further than they should, and drop further than they should. That doesn’t change the fact that market dynamics appear to have been permanently changed.


The views and opinions expressed herein are those of the Chief Executive Officer and Portfolio Manager for Tuttle Capital Management (TCM) and are subject to change without notice. The data and information provided is derived from sources deemed to be reliable but we cannot guarantee its accuracy. Investing in securities is subject to risk including the possible loss of principal. Trade notifications are for informational purposes only. TCM offers fully transparent ETFs and provides trade information for all actively managed ETFs. TCM’s statements are not an endorsement of any company or a recommendation to buy, sell or hold any security. Trade notification files are not provided until full trade execution at the end of a trading day. TCM typically rebalances on Monday, however there could be daily trades that are not reflected in this recap.  The time stamp of the email is the time of file upload and not necessarily the exact time of the trades. Most TCM ETF portfolio trades settle on a T+2 basis. These files represent an unofficial account, as all accounting and custody for the TCM ETFs is performed by Citibank. Updated TCM ETF end of day holdings are available on TuttleETF.com and SPCXETF.com

© 2021 Tuttle Capital Management LLC (TCM). TCM is a SEC-Registered Investment Adviser. All rights reserved.