Five signs of a market bubble investors are tracking

Stretched valuations and a surge in speculative trades are raising red flags

- Hannah Erin Lang

Stocks are doing crazy things again. The share price of online house flipper Opendoor Technologies has catapulted some 377% in the past month, despite a stagnant U.S. housing market. One of the biggest stock gainers Tuesday was Kohl's, a department store that has been losing ground to competitors for some time and has replaced its chief executive more than once in recent years.

On Wednesday, the crowd favorites were unusual names such as GoPro and Krispy Kreme, with both the camera company and doughnut maker notching eye-popping gains over the week.

What's going on?

Some investors say the action is the latest phase in what has turned into a near-euphoric rebound from April's tariff turmoil. Since the market tumbled and then turned higher, there has been a stampede into risky assets such as meme stocks, cryptocurrencies and shares of smaller companies that have yet to turn a profit.

To some, this resembles a bubble—a period of frenzied market activity and speculation that artificially inflates asset values, driving prices to an eventual breaking point.

"A lot of us thought that the [spring] correction had to do with the fact that valuations were rather stretched back in January and February, yet here we are," said Ed Yardeni, president of Yardeni Research. "It's almost like a slow-motion melt-up."

Here's what investors are tracking for signs of froth:

Speculative stocks are having a moment The return of YOLO bets recalls the heady days of 2021, when online traders briefly drove the fading mall retailer GameStop to a $24 billion valuation, before rising interest rates brought the bull market to an end.