Investors beware.

With the S&P 500 (^GSPC) at all-time highs, some on Wall Street are warning that a rise in speculative trades could increase the risk of a market pullback.

Goldman Sachs analysts said their Speculative Trading Indicator has risen sharply during the past few months. The gauge now sits at its highest level on record, outside of the 1998-2001 dot-com bubble era and 2020-2021 during COVID, though it still remains well below those peaks.

The indicator shows an elevated recent share of trading volumes in unprofitable stocks, penny stocks, and stocks with rich valuations compared to revenue.

Apart from “Magnificent Seven” heavyweights Nvidia (NVDA) and Tesla (TSLA), some of the stocks with the highest trading volumes over the past month include speculative plays like BigBear.ai (BBAI), Lucid (LCID), and Plug Power (PLUG).

“The recent rise in speculative trading activity signals near-term upside risk for the broad equity market but also increases the risk of an eventual downturn,” Goldman’s Ben Snider and his team wrote on Thursday.

The analysts noted that over the past 35 years, similar spikes in speculative trading often led to stronger-than-usual returns over the next three, six, and 12 months. But those returns faltered over a two-year horizon.

Speculative trading has also been accompanied by a sharp short squeeze. That’s when investors who bet that a stock will go lower are forced to buy back shares to cover their positions, and that rush to buy drives the stock price even higher.

“Like in 2021, the recent short squeeze has occurred alongside an improvement in social media sentiment and a rally in stocks popular with retail traders,” the analysts wrote.

The recent highfliers in the latest meme-stock rally noted by Wall Streeters — Krispy Kreme (DNUT), Opendoor (OPEN), and Kohl’s (KSS) — all have one key thing in common: They are heavily shorted stocks.

Since President Trump reversed his broad-based tariff stance on April 9, betting against the market has proven costly, as stocks rebounded in a V-shape recovery.

Goldman Sachs analysts also note that call option volumes, or bets that an asset’s price will go up, have recently surged.

Meanwhile, investor appetite for investments such as initial public offerings (IPOs) has also risen, along with special-purpose acquisition companies (SPACs).

“The median US IPO in June rose by 37% in its first trading day, the best month since early 2024 and a top decile return relative to the past 3 decades,” the analysts wrote.