Gorman Says Reddit Rally Traders Are Headed for ‘Rude Awakening’

The renegade traders on Reddit who spurred big market moves in niche stocks are in for a nasty surprise, according to Morgan Stanley Chief Executive Officer James Gorman.

“There are a bunch of people that are in for a very rude awakening at some point here,” Gorman said at the Future Investment Initiative conference in Saudi Arabia. “I don’t know if it is going to happen tomorrow, next week or in a month, but it will happen.”

Morgan Stanley has moved deeper into the world of retail trading with its purchase of E*Trade Financial Corp. last year. Gorman said he still sees that as a big win for the bank, citing the fourfold growth in the number of accounts the retail broker added last year.

The CEO called the development a “short-term phenomenon” of retail traders banding together and trying to pull off a so-called short squeeze. “That won’t last,” Gorman said.

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