The stock market is expected to remain under pressure in the near term on concerns over rising inflation. Since the wallstreetbets’ short squeeze saga has now abated considerably, analysts believe three of the most heavily discussed Reddit stocks—Palantir Technologies (PLTR), DraftKings (NASDAQ:DKNG), and Virgin Galactic (SPCE)—will witness massive corrections in the near term. So, we think it’s wise to liquidate one’s investments in them as quickly as possible. Let’s take a closer look.Market participants appear pleased with the U.S. government’s stimulus measures and improving economic data. Consequently, the stock market is continuing its incredible rally this year, except for a few short-term pullbacks. However, as consumer spending steadily returns to pre-pandemic levels, rising inflation has started to worry investors.
Though the Fed views any rise in inflation as temporary, economists fear that rising inflation might force the central bank to tighten its policies earlier than expected. Adding to this concern, some retail investors are speculating that wealthy investors have started to take profits now, ahead of the government's proposed increase in capital gains taxes. As such, some investors are rotating away from equity to safer and fixed-income assets. Consequently, overheated stocks, especially in the tech space, have already started witnessing a correction.
The short squeeze frenzy triggered by millennial investors on Reddit’s r/wallstreetbets (WSB) chatroom has piqued the interest of retail investors and Wall Street analysts in following the stocks discussed on the forum. Because WSB favorite stocks usually possess weak fundamentals, analysts are pessimistic on the prospects for Palantir Technologies (PLTR), DraftKings Inc. (DKNG), and Virgin Galactic Holdings Inc. (NYSE:SPCE). We believe a much-anticipated market sell-off may bring them back to earth soon. So, it’s wise to get rid of these stocks now.