Investors are warned as the S&P 500 hits all-time highs, raising concerns about speculative trades increasing the risk of a market pullback. Goldman Sachs analysts note a surge in speculative trading indicators, especially in unprofitable stocks and penny stocks.

Speculative trading signals potential upside but also increased risk of a downturn, according to Goldman Sachs analysts. Recent spikes in speculative trading have historically led to short-term gains but weakened returns over a two-year horizon. A sharp short squeeze accompanies the current speculative trading trend.

Recent highfliers in meme-stock rallies like Krispy Kreme, Opendoor, and Kohl’s are heavily shorted stocks. President Trump’s tariff reversal has made betting against the market costly, as stocks rebounded in a V-shape recovery. Call option volumes have surged, indicating investor optimism.

Investor appetite for IPOs and SPACs is on the rise, with the median US IPO in June seeing a 37% increase on its first trading day. This marks the best month since early 2024 and a top decile return relative to the past three decades.

Read more at Yahoo Finance: Speculative frenzy raises risk of stock market downturn: Goldman Sachs