Why Speculative Stock Rally Resembles the 2021 Meme Stock Boom
The U.S. stock market is showing signs of a new speculative stock rally, with dramatic gains in risky assets and cryptocurrencies reminiscent of the 2021 meme-stock craze. While economic growth remains steady and market breadth has improved, stretched valuations and speculative bets are prompting warnings from analysts who fear the market may be entering bubble territory.
A Surge in Speculative Names
Stocks like Opendoor Technologies, Kohl’s, and GoPro have experienced outsized gains despite struggling fundamentals. Opendoor’s share price skyrocketed 377% in the past month, even as the U.S. housing market remains largely stagnant. Kohl’s, a department store chain that has faced declining market share and multiple leadership changes, has also seen a surge in interest based on speculation about the sale of its real estate assets.
The renewed appetite for risk is reflected in the performance of the ARK Innovation ETF, which focuses on high-growth, often unprofitable companies. The ETF is up more than 36% year to date. According to Bespoke Investment Group, of the 33 Russell 3000 stocks that have tripled since April’s market bottom, only six have generated profits in the past year.
“It’s almost like a slow-motion melt-up,” said Ed Yardeni, president of Yardeni Research. “Valuations were already stretched earlier this year, and now the rally has extended to even riskier names.”
Cryptocurrencies Fueling Risk Appetite
Another driver of the speculative stock rally is the surge in cryptocurrency prices. Bitcoin and Ethereum have soared in recent weeks, boosted by the Trump administration’s pro-crypto stance and corporate adoption. Companies like Trump Media & Technology Group and Microstrategy are adding billions of dollars in bitcoin holdings, effectively turning their shares into leveraged bets on the cryptocurrency.
While this strategy has propelled stock prices higher, critics warn that the growing link between corporate valuations and crypto prices could amplify market risks during future selloffs.
Improving Market Breadth
Unlike previous rallies driven primarily by tech giants, the current speculative stock rally is broad-based. The KBW Nasdaq Bank Index climbed more than 7% over the past month, while industrial and energy names like GE Vernova and advertising firm Trade Desk have gained over 20%.
This broader participation suggests that the rally isn’t limited to a handful of high-growth companies, but it also raises questions about whether risk-taking is becoming excessive.
Economic Clouds on the Horizon
Although the economy remains relatively strong, cracks are emerging in the job market. Analysts worry that the combination of stretched valuations and slowing employment growth could set the stage for increased volatility if investor sentiment shifts.
“When you get worried is when cracks start forming in the economy, yet you still have a huge appetite for speculation,” said Callie Cox, chief market strategist at Ritholtz Wealth Management.