Meme stocks are driven by frothy markets and social media-driven hype. Therefore, the Fed tightening policy, means that the sector could see some profit-taking. So, these stocks are susceptible to high volatility. The Fed has expressed concerns about retail investing, indicating the need for greater monitoring. Hence, fundamentally weak meme stocks of AMC Entertainment (NYSE:AMC), BlackBerry (NYSE:BB), and ContextLogic (WISH) are best avoided in December.Popularized by online community r/WallStreetBets and trading platforms like Robinhood Markets , Inc. (NASDAQ:HOOD), meme stocks, such as GameStop Corporation (NYSE:GME), witnessed a skyrocketing rally earlier this year. Retail investors have been significant market movers, causing short-squeezes in several stocks. However, the rally did not sustain for the majority of such stocks, given their weak fundamentals.
This month, a federal court in Florida dismissed one-third of a class-action lawsuit against HOOD for their roles in the GME short-squeeze. However, the case has not been closed, and retail investors have alleged that the company has neglected duty toward its customers and violated securities laws. In its twice-yearly update, the Federal Reserve has recently expressed concerns about meme-stock volatility, mentioning that they should be monitored to keep the broader financial system unaffected.
Therefore, meme stocks AMC Entertainment Holdings, Inc. (AMC), BlackBerry Limited (BB), and ContextLogic Inc (WISH) are best avoided in December, given their weak fundamentals.