Some Wall Street analysts are warning investors to stay cautious as the S&P 500 (SPY) hits record highs. Indeed, Goldman Sachs (GS) says that its Speculative Trading Indicator — which tracks activity in risky stocks like unprofitable companies, penny stocks, and those with high valuations — has climbed sharply over the last few months. While it hasn’t reached the extreme levels of the dot-com bubble or the COVID-19-era market frenzy, it is now at its highest point since then.
Elevate Your Investing Strategy:
- Take advantage of TipRanks Premium at 50% off! Unlock powerful investing tools, advanced data, and expert analyst insights to help you invest with confidence.
Interestingly, a lot of this speculative trading involves smaller companies such as BigBear.ai (BBAI), Lucid (LCID), and Plug Power (PLUG), although popular giants like Nvidia (NVDA) and Tesla (TSLA) remain heavily traded as well. Goldman analysts say that this kind of activity can push markets higher in the short term, but it also increases the risk of a sharp drop later on. Historically, similar spikes have led to strong gains over a three to 12-month period, but have often faded over a longer two-year period.
This surge in speculation has also triggered several short squeezes, where heavily shorted stocks, such as Krispy Kreme (DNUT), Opendoor (OPEN), and Kohl’s (KSS), see their prices jump as bearish traders rush to buy back shares. At the same time, call option trading is rising, and interest in IPOs and SPACs has returned, with June’s median IPO gaining 37% on its first day – the best performance since early 2024. According to Goldman, this enthusiasm is similar to earlier meme-stock rallies that were driven by retail traders and social media hype.
Is SPY Stock a Good Buy?
Turning to Wall Street, analysts have a Moderate Buy consensus rating on SPY stock based on 424 Buys, 75 Holds, and five Sells assigned in the past three months, as indicated by the graphic below. Furthermore, the average SPY price target of $692.08 per share implies 8.6% upside potential.
