Meme-Stock Mania Returns

More 'not bad' news on tariffs... A mixed day on the surface... Greed beneath the surface... Meme stocks are back... Homeowner or homeless?... When the ducks are quacking, feed them...

'Trade is in a very good place with China'...

That's the latest from Treasury Secretary Scott Bessent in an interview this morning with Fox Business.

Next Monday and Tuesday, Bessent will meet with Chinese officials for another round of trade discussions in Stockholm, Sweden and will "be working out what is likely an extension" of the pause on the highest threatened "reciprocal" tariffs on China. The current pause – which still enacts a 30% tariff on Chinese goods – is set to expire on August 12.

Times sure have changed from earlier this year, when Chinese officials were talking about being ready for "any type of war" and tariff threats reached 145% on Chinese imports. Now, Bessent says, rather than tariff rates, the U.S. agenda in Sweden will be...

1. Having China pull back on its "glut of manufacturing." Bessent said China's 30% of global manufacturing and exports is "unsustainable." Instead, China should "concentrate on building a consumer economy" of 1.4 billion people.

2. Discussions about the "sanctioned Russian and Iranian oil that [China is] buying"... what China is "doing to aid Russia in the Ukraine war"... and the U.S. potentially imposing secondary tariffs of 100% on buyers of Russian oil.

Bessent said during the interview this morning...

We've actually moved to a new level with China, where it's very constructive and... we're going to be able to get a lot of things done now that trade has kind of settled in at a good level.

As for the rest of the world, Bessent confirmed that absent new trade deals by August 1 (the current "pause" deadline for most other countries), the "tariff level will boomerang back to the reciprocal level from April 2." But that might be fluid, too. He said...

That doesn't mean we can't negotiate when the countries are at the higher level.

On it goes...

It was a 'mixed' day today...

The major U.S. indexes were slightly higher or lower, depending on which one you looked at. The benchmark S&P 500 Index finished up 0.1%, good enough for another record close, and volatility remained tamped down, with the CBOE Volatility Index ("VIX") below 17 for a fourth straight trading day.

One standout was the health care sector. The Health Care Select Sector SPDR Fund (XLV) gained nearly 2%, bolstered by a few strong earnings reports in the industry. One example: Quest Diagnostics (DGX) announced that its second-quarter revenues were up about 15%, and the company raised its full-year guidance.

Longer-term bond yields fell again, with the 10-year Treasury yield slipping for a sixth straight day to around 4.35%, and gold gained at least 1% for the second straight day to $3,430 per ounce.

Digging deeper, signs of greed are growing...

I (Corey McLaughlin) thought we were done with this, but it looks like "meme-stock mania" is back. How else could you explain why shares of department store Kohl's (KSS) were up about 38% today?

On today's open, shares of Kohl's doubled. They gave back about 50% of that gain but were still sitting on a 30%-plus gain as of lunchtime, with the stock seeing 20 times its normal trading volume.

Combine this action with the fact that the company is endearing itself to a younger generation and is heavily shorted by Wall Street (covering about 50% of its shares outstanding, according to FactSet), and this behavior has all the signatures of a GameStop-like meme-stock mania from 2021.

A quick stop at the WallStreetBets message board on Reddit today confirmed the thesis, with users posting screenshots of their wild options bets paying off (for now).

The recent action in Opendoor Technologies (OPEN), an online housing transaction platform, is another example.

As Nick Koziol pointed out today, the stock has gone from less than $0.60 a share at the start of July to a $5 intraday high yesterday. It traded down 10% today, to below $3.

Opendoor is an "iBuying" company in residential real estate. It buys single-family homes directly from sellers outside of the conventional broker model, using a proprietary algorithm to determine fair value. Then it flips the homes, aiming to profit from a price difference after repairs and expenses are deducted.

While it's a novel idea, Opendoor is not a great business or stock. Its revenue declined year over year by 55% in 2023, roughly 26% in 2024, and 2% in the fiscal first quarter of 2025. Meanwhile, it has around a negative 50% return on equity.

We'd avoid getting wrapped up in the mania (unless you are prepared to part with any money you speculate with). It's hard to get lower grades than Opendoor in our Stansberry Score stock-rating system (ignore the "momentum bonus" in this case)...

The broader point for long-term investors is that the return of meme-stock behavior is a sign of extreme bullish sentiment coming back to some parts of the market.

And this isn't coming out of nowhere...

It aligns with what we wrote last week: that retail, or individual investors, are making trades in the market at the highest rate since 2021, which turned out to be a peak for tech stocks and popular meme-stock plays. As we shared on Friday...

According to data from the New York Stock Exchange and Citi, individuals (known as retail investors) now make up about 14% of all single-stock trading... the highest level since at least 2018.

That even surpasses the 2021 "meme stock" frenzy high of 12%. And it's not just that retail investors are becoming a more important part of the market. It's what these folks are buying that illustrates today's market environment...

Put simply, low-quality stocks are seeing huge demand. The Goldman Sachs Non-Profitable Technology Index (yes, there is one, and it measures a basket of tech companies that are losing money) has soared as the markets have returned to all-time highs.

Since an April low, this index is up 66%. That's nearly double the Nasdaq 100's 35% over the same time period.

Once again, this is just like the meme-stock craze in 2021 – when individual investors would pile into shares of companies on the verge of (or sometimes in) bankruptcy. Remember the surges that GameStop (GME), Hertz (HTZ), and even Bed Bath & Beyond saw back then.

A new beginning...

I suspect this is just the start of another wild period for stocks.

The Reddit crowd is back in bullish form, with more than one user cracking jokes (with a serious hope) about how options trades on OPEN can help them possibly afford the seemingly out-of-reach goal of buying a house...

At the same time, professional money managers surveyed by Bank of America this month have allocated their lowest amount of cash (less than 4%) since 2021. It's another sign of greed today. As we wrote on Friday...

When cash allocations hit 5% or higher, Bank of America views this as a bullish indicator. And that has a history of marking major market bottoms. But when the cash position falls below 4%, like it is today, the survey triggers a "sell signal."

It demonstrates a broad appetite for risk on Wall Street, and also that pro money managers have relatively less cash than they have had to put into stocks, meaning that selling stocks is their more likely next move rather than buying and pushing prices higher.

When the ducks are quacking...

Our Stansberry's Investment Advisory team's proprietary money-flow gauge shows that the public is pouring money into stocks at levels that mark a warning sign.

This indicator measures inflows into stock mutual funds and exchange-traded funds ("ETFs") on a monthly basis. As our team explains...

The public's opinion about the attractiveness of stocks plays a significant role in stock prices. When the public is eager to buy stocks ("inflows"), prices are quickly bid higher. When the public is selling stocks ("outflows"), prices usually become very cheap. That's why we're most interested in buying stocks when the public isn't.

There's a saying on Wall Street that's wise to remember: When the ducks are quacking, feed them. In short, when the public is buying huge amounts of shares, it's time for smart investors to sell. In the year 2000, for example, money flows into stock mutual funds (the gray line) reached a peak. That was a horrible time to buy stocks.

The six-month average stock mutual fund and ETF cash flows moved to $23.9 billion in inflows this month. The prior month saw $32.9 billion in inflows, making 23 straight months of inflows.

The Investment Advisory team considers inflows of more than $20 billion to be a "bearish" indicator. So while this indicator is closer to neutral today than a month ago, it's still flashing a warning signal.

If you're sitting on big gains in a particular position, sector, or even generally in your portfolio, it might not be a bad idea to think about taking some money off the table.

But we're not saying it's time to go "all out" of stocks, either. This bullish sentiment can go on longer than anyone might think "makes sense"... And, either way, high-quality stocks will continue to compound returns in both up and down times.

New 52-week highs (as of 7/21/25): ABB (ABBNY), Valterra Platinum (ANGPY), Atour Lifestyle (ATAT), Broadcom (AVGO), Alpha Architect 1-3 Month Box Fund (BOXX), Crispr Therapeutics (CRSP), Cambria Foreign Shareholder Yield Fund (FYLD), iShares Convertible Bond Fund (ICVT), Lumentum (LITE), NetEase (NTES), Sprott Physical Silver Trust (PSLV), ResMed (RMD), ProShares Ultra Technology (ROM), Skeena Resources (SKE), iShares Silver Trust (SLV), Synopsys (SNPS), UGI (UGI), Vanguard S&P 500 Fund (VOO), and Utilities Select Sector SPDR Fund (XLU).

In today's mailbag, another take on Adam Smith's theories from yesterday's mailbag and the idea of tariffs on goods... Do you have a comment or question? As always, e-mail us at feedback@stansberryresearch.com.

"Corey and Nick, Reading the latest comments [in yesterday's mailbag] tying Adam Smith's comments to today's tariff situation left me scratching my head. How are these things related when the world of 1776 is so different in terms of population and economy?

"Today there are 195 countries, and with technology it is possible to have trading relationships with a vast majority of these countries. Neither the number of countries, nor that level of trade capability existed in 1776.

"In 1800 (couldn't get the 1776 numbers), the U.S. was ranked #19 in population, with Russia and France both having 5x the population, and Poland 1.5x the population of the U.S. Today, we are the third largest country in the world, and the richest nation in the world... California and Texas [would] rank in the top 10 of world economies [if they were countries].

"The U.S. is massive in terms of population, buying power, and its consumer culture. Adam Smith understood that free trade also allows for specialization. Manufacturing is roughly 10% of U.S. GDP, with services being nearly 80%. We have specialized in the direction of services. Doesn't this mean that the U.S. naturally acquires products from countries that specialize in manufacturing? And logically, being the third largest, and the richest country in the world, we likely buy a huge amount of 'stuff' from countries, and they can't possibly buy the same amount from the U.S... in addition to the fact that we don't make all that 'stuff' anyway..." – Subscriber E.G.

All the best,

Corey McLaughlin with Nick Koziol
Baltimore, Maryland
July 22, 2025