Cancel Culture in stock market: FUD or valid concern?

Most people nowadays have some sort of social media they read, participate in, or follow in today’s society. Many times these platforms can become the ground zero to many types of calls to action. We see it in everything from political freedoms, social roles and etiquette, with every facet of life becoming a topic of debate and sometimes judgment. Some of the most current calls to action are perhaps blurring the line between culture and economics. In the stock market, to what degree does cancel culture play in stock movement? 

April 20, 2023
Meta Matt

Most people nowadays have some sort of social media they read, participate in, or follow in today’s society. Many times these platforms can become the ground zero to many types of calls to action.

We see it in everything from political freedoms, social roles and etiquette, with every facet of life becoming a topic of debate and sometimes judgment. Some of the most current calls to action are perhaps blurring the line between culture and economics. In the stock market, to what degree does cancel culture play in stock movement? 

The technical term for what we would call “cancel culture” within the stock market can be called divestment.

Divestment is the process of selling or disposing of assets, and investments, as a result of ethical, social, or political concerns.

Some examples of divestment are contributing to climate change, violating human rights, or supporting oppressive regimes. Divestment campaigns can be led by individuals, organizations, or institutions, such as universities or pension funds, and can have a significant impact on a company's reputation and financial performance.

A couple companies that we could use as an example of divestment are oil stocks, military stocks, and social media stocks. First thought is this, divestment does  not guarantee a negative effect on the price of the stock.

Examples are XOM (Exxon), an OIL company and LMT, (Lockheed Martin), a defense weapons company that has been testing all time highs in 2023 and sitting at strong levels through the better part of a “democratic” government under the Biden administration. 

Current issues such as the Budweiser (BUD) sponsorship of popular transgender internet star Dylan Mulvaney, or broader social media frenzies such as Elon Musk’s edgy fringe views on many geopolitical issues can both be considered examples of stocks that were called on to be “canceled”.

BUD has sold off about 3% at the time of writing this, and Tesla recently had a 50% selloff on the heels of TWTR buyout accusations as well as a flurry of edgy and controversial statements. Another example of “canceling a stock” is streaming platforms Netflix (NFLX) and Disney (DIS) having major blowback with both subscription cancellations and social media calls to boycott.

That being said, let’s consider the economy’s part in this, namely the stock market and whether cancel culture is the catalyst that can hit companies where they hurt, in their wallets, or if this is simply a case of much ado about nothing on stocks bottom lines.

If you consider all of our examples above, they are all strong fundamentally solid companies that have not had long term negative effects from these negative catalysts NFLX and DIS rebounded quickly and seem relatively strong and unscathed 6 to 12 months removed from similar calls to “cancel”.

We have also seen stocks that have had epic rallies when social mania bleeds into the market triggering strong runs, some great examples are stocks tied into COVID fear (MRNA), Trump support (DWAC), and Elon tweets (DOGE). 

There is definitely consideration needed with society and the stock market moving synonymously. January 2023 was the largest month in history, retail investors poured an average of $1.51 billion per day into U.S. equities, the highest amount ever recorded, there is something to be said about how much hot topics of social media and culture in general definitely plays a part is stock prices.

However, more than 40% of the S&P 500's trading volume is made up of what's known as “zero-day-to-expiry” options (0DTE) which demonstrates that a large portion of the order flow day in and out doesn’t stem from any sort of catalyst, much less social and cultural news and issues.

In closing, it's always best to consider all catalysts when buying or selling a stock, as the more knowledge you have, the more informed your decision will be.

We have all heard of the old adages such as “buy the rumor, sell the news” and MOASS “mother of all short squeezes”, but being a successful trader comes with a technical trading foundation, and never buying based on an impulse. Market sentiment, cancel culture, divestment, and news catalysts are always something to consider and be aware of, however the charting and risk exposure always stay the most important.



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