• Goldman Sachs' Speculative Trading Indicator hits its highest level since the dot-com and pandemic bubbles, signaling extreme risk appetite.
  • Trading volumes surge in unprofitable stocks, Magnificent 7 tech names, and digital assets, with call option activity at 2021 highs.
  • SPACs raise $9B in Q2, and a retail-favorite stock basket jumps 50% since April, but historical patterns suggest long-term risks.

A Market Fueled by Speculation

Goldman Sachs' latest data reveals a market gripped by speculative fervor, with its proprietary Speculative Trading Indicator reaching levels not seen since the dot-com era and the 2020-2021 pandemic rally. The surge is driven by heavy trading in unprofitable stocks, penny stocks, and companies with sky-high EV/sales multiples, according to internal metrics reviewed by the firm.

Call option activity—a key gauge of bullish sentiment—has spiked to its highest since 2021, while IPO and SPAC issuance has rebounded sharply, with blank-check companies raising $9 billion in Q2 alone. A basket of retail investor favorites has soared 50% since April, underscoring the market’s frothy tone.

"This isn’t just about the Magnificent Seven or quantum computing hype—it’s a broad-based rush into risk," said one Goldman strategist, speaking on condition of anonymity. "The parallels to past bubbles are hard to ignore."

Short-Term Gains, Long-Term Warnings

Historically, such speculative spikes have preceded strong S&P 500 returns over 3-12 months, but weaker performance—or outright declines—over a two-year horizon. The Wilshire 5000’s valuation relative to GDP (the so-called "Buffett Indicator") now sits at a record 212%, far above historical norms, raising sustainability concerns.

Goldman’s analysis suggests the current rally could continue in the near term, fueled by momentum and retail participation. However, the bank cautions that elevated valuations and frenzied trading often precede sharper corrections, as seen after the dot-com and pandemic-era peaks.

Attempts to reach the SEC for comment on whether regulators are monitoring the speculative activity were unsuccessful. Meanwhile, market participants remain divided. "You can’t fight the tape," said a hedge fund trader, "but you’d better have an exit plan."