Though there are similarities to 2021, today’s capital markets are being driven by very different factors
The capital markets have been feeling a lot like 2021 recently. No, that’s not because of any political similarities, but because meme stocks are back in fashion.
Again, it’s the turn of previously-struggling consumer brands and retailers to enjoy a sudden share price surge. Donut-maker Krispy Kreme, estate agent Opendoor, mortgage provider Rocket Companies and retailer Kohl’s have all seen their share prices balloon in recent weeks.
Then there’s American Eagle, the slightly unfashionable clothing maker whose shares are up almost 20 percent month on month after it unveiled a new campaign starring actress Sydney Sweeney.
It seems to mirror what happened four years ago, when Reddit stock-pickers jumped on a bandwagon that saw shares in video game seller GameStop and cinema chain AMC rocket, not due to their financial performance but rather retail investors’ love and nostalgia for the brands.
Look under the surface of last week’s price moves, however, and there appears to be something else going on. Well, for American Eagle, it’s probably just because they cast a young, attractive twenty-something in their latest ad campaign.
No, this mania goes beyond bored Reddit posters looking for a new way to pass the time. For one, the retail market is that much more engaged: since the pandemic introduced the activity to many bored folks at home, the use of trading apps and the rise of social media ‘finfluencers’ means that any movement in a familiar brand will have ripples across the online world very quickly.
‘It’s much easier to get people interested and excited about manipulating a household name than it is with a relatively unknown stock,’ says Neil Saunders, managing director at analytics firm GlobalData. ‘I think that recognition is quite important in allowing almost the meme or the narrative to spread, and for more people to jump on the bandwagon.’
Moreover, research by analysts at Goldman Sachs suggests that speculative trading – whether in pink-slips, penny stocks, unprofitable companies or those with vastly over-inflated valuations – has climbed to new highs. Such levels, the analysts say, have only previously been seen in 2021 and during the peak of the dotcom boom of the 1990s. Other instruments are also proving popular: zero-day option transactions are growing year-on-year, with 2.1 mn changing hands in Q2 2025 according to exchange operator Cboe Global Markets.
All of these are places where savvy retail investors may seek to make their quick returns in the midst of a meme-stock bubble. But Russ Mould, investment director at AJ Bell, sees it differently.
‘The ongoing interest in, and widespread use of, zero-day options by traders may also be helping to fuel markets now, but history shows that confidence soon evaporates if the market stumbles,’ he explains. ‘History suggests the liquidation (forced or voluntary) of positions bought on margin, or via exotic leveraged instruments, may only serve to accentuate any subsequent market decline, or at the very least stoke additional volatility.’
He adds that the Federal Reserve will have to mull over what it may be able to do in order to avoid any following instability. That may include, much to US President Donald Trump’s delight, a cut to interest rates.
But it’s safe to say that while meme-stock mania has changed, the potential danger it poses to the markets remains very real.
What do you make of the recent surge in meme stock prices? Let us know, either via LinkedIn, or email us on [email protected].
