JJ Kinahan, TD Ameritrade Chief Market Strategist, joins Yahoo Finance Live to discuss why more investors are buying meme stocks this year and the potential risks of buying GameStop and AMC Entertainment.

Video Transcript

MYLES UDLAND: OK, joining us now to talk about the state of the markets and how retail has been playing this market is JJ Kinahan. He's the Chief Market Strategist over at TD Ameritrade.

So JJ, right before you came on, you heard us talking about what's happening with the meme names. You guys have your latest survey out of what your investors have moved in and out of the most. And a name that I did not see on that list was AMC. What have you seen on your side in some of these big names that really constitute kind of the core of the meme trade?

JJ KINAHAN: Sure. So you know, if you think about it, AMC, GameStop, et cetera, for the last month wasn't necessarily as big a story. It became a bigger story right at the end of the month. What was interesting to me is when I looked at those stocks is that the week before Memorial-- so Memorial Day was a week ago today, it was last week on Tuesday that we really saw these explode. The week before, Wednesday, Thursday, Friday is when we actually saw our clients start to buy those names more. On Tuesday and Wednesday, our clients were more even in terms of their buying and selling of the stocks. So I thought that that part was really, really interesting overall.

Obviously, the interest increased pretty significantly. Actually the one name that you didn't talk about but I know is part of the picture-- and just, you guys, it was a great discussion, had a lot to cover there-- was BlackBerry. BlackBerry was a name that in terms of percentage-wise, the volume picked up very significantly. Because GameStop and AMC continue to have this sort of interest all the time.

And I thought it was interesting, you know, Julia was comparing some of this when we go down and people come in and buy it, to Tesla. And you know, and the stocks our clients purchased last month, Tesla was one of them, because they did sell off. And I think there was a little bit of a difference-- and it's one of the things you guys were talking about-- and that I also believe in talking to our clients that there's a belief that AMC is also a reopening play as much as a meme stock play, because people think that there is a hunger for movies and good movies, and people like the theater experience.

So AMC, to me, is probably the most interesting of these in the how people are looking at it right now, whereas GameStop, as you said, I think is more of the pure meme stock and we're trying to figure out what the fundamentals are. And I think their earnings coming out this Wednesday is going to be a really interesting story.

JULIE HYMAN: Man, can you imagine how many people would have to go to the movies this year to justify that AMC price? I mean, I don't know if there are enough theaters.

JJ KINAHAN: I don't disagree with you, Julie. I don't disagree.

JULIE HYMAN: JJ, I also want to ask you overall, I noticed that you also found in your survey that people were net sellers of equities on your platform last month. What do you think that was about?

JJ KINAHAN: Well, I think that a lot of it is because if you think where we're at in the market cycle overall right now, there's a bit of confusion as to what's next, if you will. And so I think a lot of people who have enjoyed some of the stocks that have run up are just taking profits. You know, we talked last month how our clients had sold some of the vaccine stock, the Pfizers, the Modernas. Moderna had a really nice run up again. And our clients continued to sell a lot more of it.

So it's really interesting to me that Wells Fargo, coming up near 52-week highs, our clients selling that. What I'm finding interesting is that as stocks are going up and hitting highs, our clients are perhaps selling them in a larger proportion than they did before. Where they would maybe only sell a small part of their position, they're selling larger parts of their position now.

And I think much of that has to do with this sort of what's next. We know the rate picture is certainly not clarified in most people's minds overall. The inflation picture hasn't clarified. So I think a lot of people are just sort of sitting there saying, I'm going to-- they did buy fixed income perhaps heavier than they have in the past. But I feel like for a lot of people right now, fixed income is a place of storage, if you will, to see what happens with the equity market so that they can repurpose that money back into the equity market.

BRIAN SOZZI: JJ, do you think just this rise in the meme trade, really multiple names, AMC, BlackBerry, there's probably 10 other ones I can mention, it is making it riskier to invest in the stock market?

JJ KINAHAN: I don't think it does, Brian. You know, as I said, I thought your discussion was really interesting, before I came out, about what it means for indexing, et cetera, overall. Well, you know, and the VIX, actually, tells me that the overall market right now, as we start this morning's action, we're seeing the VIX near seven month lows. So that measure of volatility is actually telling me that people are viewing there's less risk in the market right now.

What I do think, though, is that at a macro level, you may see it as less risk. On a micro level, I actually think that that's the biggest thing I hope investors are taking away, higher volatility. Substitute the word risk for volatility. There's also higher risk if you're going into these stocks. The moves on AMC, the implied move out six months is basically the stock's value, telling you it could double or go back to basically zero, so if you look at what the options market is telling you overall.

So I think people, when they go into these stocks, have to be very ready for the risk they are taking. Everyone's comfortable with making money. But do you realize what you're risking on the downside in order to make that money? And unfortunately, there are some clients who don't look at that. I think one of the things that the industry has done very well is try and educate people as much as possible. But just like everything else, unfortunately not everyone looks at them.

JULIE HYMAN: JJ, just quickly here, as we go into summer and as we do get more stuff reopening, more people vaccinated, how do you think this is going to affect stock volumes, which we tend to see drop in the summer anyway? Are we going to see that even more acute this summer? Add on to that also stimulus checks and such running out.

JJ KINAHAN: Well, I think that we'll continue to see not certainly near we were in January and February, Julia. But I think we'll see what we've seen in the last few weeks, which is still elevated to what we've seen last year and the year before. I don't know that there's going to be what we saw in January, and primarily because, you know, the meme stocks are an interesting story, again, but not to the torrid pace they were back in January. What really is driving a lot of the volumes right now are these interesting individual stories.

So we'll see if we get some interesting individual story that we're not looking at right now. The good part about all of this is it's bought more people's interest in the market. And longer term, that's the great benefit of everything that's happened with these meme stocks.

MYLES UDLAND: Certainly agree, more eyes on the market is a net positive for stocks overall. JJ Kinahan, Chief Market Strategist at TD Ameritrade. JJ, always appreciate the time. We'll talk to you next month.