Investors are once again chasing some of the most speculative names in the stock market

A worried NYSE trader

A trader reacts as he works on the floor of the New York Stock Exchange (NYSE) in New York, United States, March 18, 2020.Lucas Jackson/Reuters

  • Animal spirits have returned to the stock market as investors again pile into high-risk names.

  • Carvana, for example, has soared nearly 700% since the start of the year even as it navigates a precarious financial situation.

  • “Meme stocks have been catching a bid lately, which paints a bullish picture for overall market conditions,” DataTrek Research said.

A new bull market in equities has led to the return of animal spirits among investors, DataTrek Research said in a Friday note.

Investors are once again on the hunt for high-risk stocks in a market that has done little but risen since last October’s lows. The S&P 500 has jumped about 30% since then, while the Nasdaq 100 is up 50%.

It’s a flip-flop from 2022, when stocks consistently fell and led to a discouraged investor base that was bearish on just about everything.

But in 2023, speculative stocks like Carvana, Riot Platforms and Marathon Digital have posted impressive year-to-date gains of between around 500% and 700%. These stocks are considered high risk because they are not yet profitable and in some cases have large debts.

The most recent example of animal spirits could be found in Nikola. The electric vehicle company, which is still in recovery mode after the fall of its former fraud-convicted CEO, Trevor Milton, saw its share price soar as much as 109% this week after announcing it would sell 50 of its fuel cells. trucks over the next five years.

Many of these types of stocks make up the Roundhill MEME ETF, which has jumped around 60% so far in 2023. And according to DataTrek Research co-founder Jessica Rabe, the gains could continue as the ETF is still about 50% below its record. summit seen in December 2021.

“The current positive momentum in Meme stocks shows investors’ animal spirits are starting to heat up again,” Rabe said.

The strong rally in high-risk stocks and its signal that investor enthusiasm has returned to the market is also indicative that stocks are indeed in a bull market as they advance to new 52-week highs.

“Meme stocks have been catching a bid lately, which paints a bullish picture for overall market conditions,” Rabe said.

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