Risky Stocks Frenzy Heats Up as S&P 500 Hits Records
The S&P 500 logged its 15th record close of the year Thursday, with the Nasdaq also setting a new high. On the surface, that’s bullish news. But underneath, speculation is surging — and some see echoes of past bubbles.
Bronte Capital summed up the mood bluntly:
“Garbage stocks have risen aggressively. This is like early 2021, when people seriously talked about fraud as an asset class.”
Speculation is rising — but not maxed out (yet)
Goldman Sachs’ Speculative Trading Indicator (STI) — which tracks activity in penny stocks, unprofitable companies, and high-multiple names — has jumped sharply in recent months. It’s still below the extremes of 2000 and 2021, but the trend is unmistakable.
Other risk signals are flashing, too:
- Options frenzy: Call options now make up 61% of trading — highest since 2021.
- IPO pops: First-day returns are soaring.
- SPAC comeback: $9B in Q2 2025 issuance marks the busiest since 2022.
- Short squeezes: Heavily shorted stocks have surged 60% since April, rivaling 1999-2000 and 2020-21 rallies.
Recent squeezes — like Kohl’s (KSS) and Krispy Kreme (DNUT) — highlight retail traders’ influence, as Goldman notes their “favorites” basket moves in lockstep with the STI.
Supportive market, but for how long?
Despite record highs, positioning remains neutral, short interest is elevated, and breadth is narrow — factors that can still fuel upside. But Goldman cautions: bursts of speculative activity have historically led to strong short-term gains, followed by weaker returns over the next two years.
