It’s been a weird year for the old guard of the financial markets industry.
Consider the events of two weeks ago: U.S. employment data trailed economists’ forecasts by the most on record, and more than 130 companies in the S&P 500 reported earnings.
Now consider what created the most buzz in markets: a massive rally in Dogecoin amid speculation that Tesla Inc. founder Elon Musk would give the cryptocurrency a boost while hosting Saturday Night Live.
The pandemic, and the nascent recovery from it, have caused a whiplash in the fundamentals underlying the value of asset prices everywhere. Yet at the same time something else has happened: The whimsical entertainment value of some assets has undeniably emerged as a reason investors are bidding prices higher.
Dogecoin, which started as a joke based on memes about a talking dog with a limited vocabulary, is hardly the first example. Funny memes also played a huge role in the frenzy in the shares of GameStop Corp. and other companies that participants on Reddit’s WallStreetBets forum promised to send “to the moon” earlier this year. Even since the Reddit mania has worn off, GameStop is up more than 750% this year —a return that would have required an investor in the S&P 500 to buy and hold the index for about a quarter-century. And good luck holding it long enough to match the 21,000% Dogecoin rally over the past year. Elsewhere, the craze in nonfungible tokens, or pieces of digital art that live on the blockchain and in some cases sell for millions of dollars, is perhaps the purest example.
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