Wall Street has seen a crazy first quarter fueled by stimulus checks, meme stocks, leverage blowout, SPAC frenzy, and Bitcoin. Traders need to brace themselves for another equally irrational quarter, at the least.

Meme Stocks

Meme stocks such as GameStop experienced massive volatility over the last quarter. Retail investors gave severe nose bleeds to hedge funds which built short positions in GameStop. A lot of this was chiefly due to the fact that retail traders took opposite bets against hedge funds. The so called-smart money institutions and money managers can no longer ignore retail traders.

Stocks such as AMC, American Airlines AAL , PLTR, AMD and NIO moved significantly higher, but some of them lost their steam. Most of these names were not top picks among institutional investors, but retail traders backed them up.

Tesla TSLA And Bitcoin

Another major theme during the first quarter, and possibly the biggest event, was Tesla's investment in Bitcoin. This has opened the conversation that other S&P 500 companies could also diversify their treasury system by allocating some portion of their capital in Bitcoin. Of course, Tesla is one-of-a-kind. The company's almost cultish belief in Bitcoin is entirely different because its customers can also buy its cars using Bitcoin. Nevertheless, it will not be changing that digital currency back into fiat.

SPACs

Special Purpose Acquisition Companies (SPACs), also known as blank-check companies, became increasingly popular during the first quarter of 2021. We have had 250+ SPACs so far this year, and celebrities and sports personalities are backing them up as sponsors. Investors like Cathie Wood, from ARK Investment Management LLC PZN , also bought a SPAC with tennis star Serena Williams on the board.

Sector Rotation

Soaring Treasury yields and concerns about rising inflation made investors sell tech stocks during the first quarter. The Nasdaq Composite index is certainly the laggard among the S&P 500 and the Dow Jones Industrial Average. We have seen money flowing into cyclical and value stocks during the first quarter.

Archegos Capital Management

The Security Exchange Commission (SEC) isn't only concerned about leverage-related issues concerning retail traders. Archegos Capital Management was given excessive leverage by major banks such as Credit Suisse CS , Deutsche Bank and many more. The family office was forced to sell its tech positions in media companies such as Tencent Music, ViacomCBS, Discovery and Baidu BIDU . Shares of these companies plunged, and this also made banks like Credit Suisse issue grave profit warnings.

U.S. President Joe Biden signed another coronavirus-related stimulus package of $1.9 trillion, which has armed traders with fresh capital. We haven't so far seen much evidence that this money is coming into the market, despite several banks producing their estimates of how much of the stimulus check money could be heading towards the stock market. It has been stated that nearly $190 billion of the stimulus money could boost the stock market. One thing that is clear from this is that U.S. stock indices have closed the quarter, and the month of March, at an all-time high.

The key point to keep in mind is that we can no longer discount the strength of retail money. We may likely see the social forums such as Wallstreetbets picking up momentum. After all, retail traders do have money, and they will invest it somewhere.

Regulations

The SEC is likely to adopt a tougher stance on family offices to avoid any systematic risk to the financial system. Governance around leverage is going to remain the main focal point.

Another Round of Stimulus

President Biden revealed his new infrastructure stimulus plan of $2 trillion yesterday. Although Democrats control both chambers of Congress, their majority is only by a narrow margin. So, it is essential to keep in mind that while Democrats may support all the infrastructure spending such as building new bridges, airports and upgrading the internet infrastructure, Republicans aren't likely to nod their heads for a tax hike.

Lawmakers know that the economy needs infrastructure upgrades, so we are likely to see more money pumped into the system. As for the market, traders are addicted to stimulus-related news, resulting in markets moving much higher.