Key Takeaways
- Retail traders drove a rally in beaten down stocks like Kohl’s, Opendoor, and Krispy Kreme this week.
- Behind those moves, according to Goldman Sachs, are indications that investors are hungry to take on risk in search of quick gains—but markets like this one historically turn sour.
Meme traders are back and doing donuts in the stock market. What does it all mean? More than anything, a big appetite for risk.
Shares of companies like Kohl’s (KSS), Opendoor (OPEN), 1-800-FLOWERS (FLWS), GoPro (GPRO)—and, yes, Krispy Kreme (DNUT)—all popped at various moments this week as investors piled in, often for reasons no more obvious than the thrill of watching picks fly. On forums like Reddit’s wallstreetbets, enthusiasm jumped from stocks like Sydney Sweeney-powered American Eagle (AEO) to GoPro (GPRO).
The return of widespread meme-stock trading coincides with a rise in Goldman Sachs’ “Speculative Trading Indicator,” which currently sits at its highest level outside of the 1998-to-2001 and 2020-to-2021 periods. The measure shows heightened trading volume in unprofitable stocks, penny stocks, and stocks with high enterprise-value-to-sales multiples.
The current meme mania recalls the stimulus-check-fueled rallies in GameStop (GME) and AMC Entertainment Holdings (AMC) of the Covid-19 pandemic. The financial media has seized on the opportunity to detail traders gone wild, capturing among other things new stock acronyms like “DORK.”
Some are trying to get ahead of the game, searching for clues that might lead to the next hit. Online coordination appears to have had a hand in pushing outsize moves in highly-shorted names both then and now.
Analysts broadly see the latest action as a signal that investors’ willingness to take on risk is strong. Call options, or contracts linked to an expectation that the price of an asset will rise, have recently accounted for nearly two-thirds of all options volume, Goldman Sachs’ analysts wrote recently, the highest share since 2021.
Risk-on vibes are spurring activity in equity capital markets. The performance of stocks that went public in June, for example, was the best since early 2024, according to Goldman.
Good feels don’t last forever. Sharp jumps in speculative trading activity over the last 35 years tended to coincide with above-average S&P 500 returns in the short term before giving way to downturns, Goldman analysts said.
