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Why ‘stonk’ stocks are soaring

The word “stonk” started as a joke of the mispronunciation of the word stock.
Published: Feb. 4, 2021 at 7:35 AM EST
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LEXINGTON, Ky. (WKYT) - This past week has been wild for the stock market. Some of the keywords we’ve been hearing are Reddit, hedge funds, and the phrase “stonks.” Independent financial advisor Josh Smith of Strategic Wealth Designers joined the newscast to explain the madness that the last week in the stock market has been. The word “stonk” started as a joke of the mispronunciation of the word stock.

“The stonk stocks have a little more meaning after this week,” Smith says. “Essentially why we are hearing about them is because small investors on Reddit have been buying low performing stocks, like GameStop and AMC. This drove the prices of these stocks sky-high. Individuals are going against hedge funds, who had been short-selling these stocks.”

The scale of the situation is unprecedented. Small investors have never taken on such a big fight against Wall Street, in the sense that their actions played a large part in how the market reacted. This short squeeze resulted in trading limits being imposed on investors last week.

“We saw institutions place restrictions on trades that could take place,” Smith says. “Robinhood, for example, is facing scrutiny for placing buying restrictions on its users. The Securities and Exchange Commission is currently reviewing the actions that have taken place and will determine if what we saw occur was legal.”

The prices of these “stonks” won’t rise forever. Eventually, we will probably see them return to a similar price to where they were before the whole situation occurred. To see additional stories surrounding business and economic news for the Lexington area, visit https://WKYT.com/MoneyMatters and if you have a question for Josh send an email to info@swdgroup.com.

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