Beyond Meat Inc ( BYND )‘s amazing rally this week points to the increasing power of thematic ETFs to propel near-term market action, especially when retail sentiment and ETF flows intersect.

• BYND shares are climbing with conviction. Get the complete analysis here.

Shares of Beyond Meat ( BYND ) jumped 127% on Monday and 146% on Tuesday after Roundhill Investments included the stock in its newly revamped Roundhill Meme Stock ETF ( MEME ) . The addition set off a gargantuan short squeeze, as over 63% of the firm’s tradable shares were shorted prior to the announcement, based on FactSet data cited by CNBC.

Roundhill’s move to re-launch the MEME ETF in early October, after earlier closing it because of lack of interest, seems to have caught up with a re-emergence of speculative trading.

The ETF follows a portfolio of heavily shorted and widely talked-about stocks, the same characteristics that portrayed the 2021 meme stock frenzy. Beyond Meat’s inclusion immediately made it the newest recipient of that tactic.

Also Read: Retail Investing Is A ‘Structural Force’: Roundhill CEO Says MEME ETF Reflects Market Shift

What Does ETF Inclusion Do?

ETF inclusion tends to enhance market volatility, especially in smaller, deeply shorted issues. After an ETF purchases shares to fulfill its rebalancing obligation, the resulting liquidity rush can incite follow-on buying by retail speculators and momentum funds. In the case of Beyond Meat ( BYND ), that feedback mechanism propelled the stock out of penny-stock status (it was at 65 cents last week) to about $3.60 in two days.

The rally coincided with a good company news item, too: an extended distribution agreement with Walmart. However, investors should be warned that when ETFs such as MEME focus on stocks with lots of short interest, it can induce mechanical pressure that powers quick, fleeting rallies.

Roundhill’s MEME ETF turnaround can also be seen as a gauge of overall investor demand for riskier assets when markets are still strong. Nonetheless, the episode is a reminder that thematic ETFs sometimes work as accelerators instead of diversifiers.

Read Next:

AMD’s AI Ambitions Clash With Chip Leak Jitters — Semiconductor ETFs Feel The Whiplash