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: 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.

Retail Traders Are Behind This Market Rally, Strategists Warn This week’s market action offers something for everyone — earnings data for fundamentals-focused investors, and soaring gains in beaten-down names for risk-seeking traders. But beneath the surface, strategists say one group is firmly in control: retail investors. Barclays strategists led by Venu Krishna cite their Equity Euphoria Index, a proprietary gauge that tracks the share of stocks in “euphoric territory.” The index is surging toward its highest level of the year, driven by options activity — particularly the zero-day-to-expiration contracts popular with retail traders. This pattern of rising prices and heightened volatility, they say, is a hallmark of “upside chasing.” Charles Schwab’s chief investment strategist Liz Ann Sonders agrees. Since the April 9 “Liberation Day” tariff low, the market’s biggest winners have been unprofitable tech names and heavily shorted stocks — exactly where retail investors are most active. Speaking on the Excess Returns podcast, she said these flows have forced institutional investors to reposition, but not fully commit to risk. That, she suggested, leaves room for further upside — the so-called “pain trade.” JPMorgan analysts, led by Nikolaos Panigirtzoglou, note that corporate buybacks are also providing support, even as uncertainties linger over tariffs and economic policy. At the same time, more stable GDP and inflation data have reduced volatility, prompting volatility-control funds to raise their stock exposure from 20% earlier this year to about 55%, with potential to reach 70% if conditions remain calm. Still, Sonders cautions the challenge now isn’t simply uncertainty but instability — constant policy shifts that make it difficult for companies to plan. Outside of AI-related spending, corporate investment and hiring remain largely frozen, she added.

A key U.S. stock index has remained above its 20-day moving average, underscoring the market’s resilience. Japan is also in focus Wednesday after reaching a tentative trade agreement with the U.S., while speculation swirls over whether its prime minister will soon depart. The tariff news has fueled optimism heading into the Aug. 1 deadline — a date even President Donald Trump and Treasury Secretary Scott Bessent suggest is flexible. Carson Group’s chief market strategist, Ryan Detrick, points out a striking milestone: The S&P 500 (SPX) has now closed above its 20-day moving average for 60 straight sessions. Aside from a brief scare on June 20, the streak has remained unbroken. Historically, runs this long have occurred only four times since 1950, with average gains of 20% to 26% in the year that followed. Detrick’s analysis shows eight similar streaks overall, but this marks the first instance in the 21st century. While one exception in 1965 saw the market decline a year later, the typical outcome was a median gain of 10.4% and an average gain of 9.2%. “This is yet another clue this bull market still has legs,” Detrick said. Some analysts caution, however, that such strength could also signal overheating — a pattern recently noted in the Nasdaq-100 as well.

What Will Drive Stocks Higher Now? Strategist Sees Bullish Fatigue Setting In Since 2012, the S&P 500 has been on a mostly steady climb—an easy reason for investors to keep holding on. But recently, it’s not just that stocks are rising; it’s that sellers have all but vanished. And that, says Andrew Thrasher of Thrasher Analytics, could be a red flag. In his latest research, Thrasher found that downside activity in the market has hit unusually low levels. “We’re not seeing much volume in declining stocks,” he told MarketWatch. “There’s no real capitulation or heavy selling happening—just relentless buying. That’s often a sign of overly bullish sentiment.” His data shows that in early July, just 39% of trading volume came from declining stocks—well below the 42% threshold that has historically signaled a near-term pullback. Similar setups preceded drops in 2020, 2019, and 2016. Now, that ratio has nudged higher to 44%, a sign that sellers may finally be stepping back in. “We’re starting to see more downside volume, fewer new highs, and generally weaker participation from individual stocks,” Thrasher said. “It’s not falling apart—but it’s thinning out.” Thrasher, who helps manage over $800 million at The Financial Enhancement Group, says the market still looks “structurally sound,” but he questions what catalyst could drive the next big move up. Lingering tariff risks and the potential for rising inflation could pressure consumers and shift market sentiment. While he continues to focus on price action first and foremost, Thrasher warns that overly one-sided bullishness can’t last forever. “At extremes, the market becomes like a teeter-totter—too many people on one side, and it can’t move.”