One of the most incredible short squeeze rallies we’ve seen in modern history has to go to AMC Entertainment (NYSE:AMC). This movie theater chain went from approximately $2 per share in December of 2020 to more than $70 per share in mid-2021. Of course, AMC stock has since given up most of its gains, similar to other meme stocks such as GameStop (NYSE:GME).
Today, AMC stock has dropped a whopping 11% at the time of writing. Most high-profile stocks that fit into the higher-risk, higher-return buckets have also underperformed meaningfully today. A range of market-related headwinds are taking most stocks lower, as investors prepare for what looks to be a lengthy battle with inflation.
Today, bond yields creeped up to their highest levels since the onset of the pandemic. Additionally, the yield curve flattened to its smallest margin since the pandemic began, signaling concerns about economic growth moving forward.
Thus, the economic outlook moving forward is shifting rapidly from a rose-colored tint to a rather ugly tone. Sentiment is beginning to turn bearish, with investors finding the exits on certain trades in a big way.
Let’s dive into what’s behind AMC’s move today.
AMC Stock Sinks Along With Other Speculative Assets
Perhaps the most speculative bubble we saw form this past year was the one in short squeeze stocks. Yes, AMC and GameStop had their time in the sun. However, all indications are that investors are looking to aggressively de-risk their portfolios right now. With a rotation out of growth and into value taking place, it appears there’s little room for speculative short-term bets right now.
That’s not to say that all retail investors are in the same boat. Today, #AMCNOTLEAVING is trending on Twitter, suggesting retail investors aren’t necessarily done fighting the forces of evil (i.e., hedge funds). That said, the extent to which this battle was already won, with certain hedge funds closing up shop and others incurring massive losses, is certainly worth considering.
If this recent risk-off rotation into more defensive equities continues, it’s entirely possible AMC stock has a long way to go. After all, investors ought to be reminded this was a $2 stock a little more than a year ago. Currently trading around $18 per share, AMC could have a long way to drop. Don’t tell the folks on Twitter, though.
On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.