Stretched valuations and a surge in speculative trades are raising red flags, even as growth persists

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.

Shares of the ARK Innovation ETF, a fund that includes a number of speculative companies operating at a net loss, have climbed more than 36% year to date.

Prices of Ethereum and bitcoin have soared in recent weeks, lifted by the Trump administration’s pro-cryptocurrency policies and growing acceptance by mainstream financial institutions.

But a new group of buyers has also pushed up prices: publicly traded companies that stockpile bitcoin, effectively transforming their own shares into a leveraged bet on the cryptocurrency.

Critics caution that practice could amplify risks in the crypto market, deepening selloffs. Those warnings haven’t deterred an estimated five dozen companies from pursuing similar strategies.

The number of stocks in the benchmark S&P 500 closing above their 50-day moving average is hovering at levels last seen in the fall, before the postelection “Trump bump” in share prices. Analysts typically consider that kind of improving breadth a sign of a sustainable bull market.

Yet stock valuations are stretched. The equity risk premium, defined as the gap between the S&P 500’s projected earnings yield and the yield on 10-year Treasurys, is close to zero. That means that the extra return for owning stocks over lower-risk bonds has nearly vanished, which investors consider an unhealthy sign.