According to the latest survey, this week's “meme-stock” (meme-stock) boom indicates a bubble in the US stock market and is likely to peak.

GameStop Corp. and AMC Entertainment Holdings Inc. are the two biggest favorites of the 2021 meme stock boom. After retail trading idol Keith Gill, nicknamed “Roaring Kitty” (Roaring Kitty), posted a mysterious post on social media platform X this week, the two companies' stock prices first soared and then plummeted. GameStop surged nearly 180% on Monday and Tuesday, and AMC surged 135%, but was sold off on both Wednesday and Thursday, losing more than half of its gains.

Although the crazy price action revived memories of the meme stock frenzy a few years ago, many of the 230 respondents to the MLIV Pulse survey suspected that this was an encouraging sign for the stock market as a whole. As the S&P 500 and Nasdaq 100 hit new highs this week, more than 40% of respondents saw the GameStop and AMC deal as a sign of excessive excitement and a potential reason to sell. GameStop was down about 25% in early Friday trading.

Steve Sosnick, chief strategist at Yingtou Securities, said on the phone, “Unless the stock market is already a bit excited, we won't see such meme stocks continue to soar.”

The MLIV Pulse survey found that 43% of respondents viewed the surge in meme stocks as a reverse warning for future markets. About a quarter of respondents think this is a positive sign for stock prices. Meanwhile, 66% of respondents said it would not pose a real threat to the entire stock market.

Compared to the boom in 2021, the recent surge in meme stocks was mostly a fleeting blip. At that time, retail investors joined forces to push up the stock prices of Wall Street shorting targets, thus driving a large-scale rebound. The move stemmed from boring, zero-fee brokerage and social media chat rooms during the lockdown, which took weeks for investors and Wall Street professionals to understand. One similarity is that several interviewees indicated that investor boredom was one of the reasons driving the latest action.

The current rise in the stock market is mainly due to the resilience of the US economy, strong consumer spending and falling inflation, which have provided impetus for growth and boosted the prospects of US companies.

Federal Reserve policymakers have made it clear that they plan to keep interest rates high for a longer period of time to curb inflation. This economic strength leaves no reason for policymakers to rush to cut interest rates.

“If the Fed waits too long to cut interest rates, it could weaken the economy and put pressure on the stock market,” said Stephanie Lang, chief investment officer at Homrich Berg. “Despite the rapid correction in meme stocks, this is a healthy sign for the market.”

While investor confidence has been growing, one area of the market suggests it hasn't been excessive. Athanasios Psarofagis, an ETF analyst at Bloomberg Industry Research, said that leveraged long exchange-traded funds (using derivatives to amplify daily index returns) are far from showing the enthusiasm of the 2021 meme stock boom.

Another huge difference between the latest trend in meme stocks and the 2021 boom is that it is sophisticated traders rather than retail investors who are driving the trend this time. According to Sosnick's data, in the five trading days up to Wednesday, GameStop was the most actively ordered stock by Yingtou Securities customers, and AMC ranked 17th.

Sosnick also said that although GameStop showed net buying interest, the options market also showed net selling interest, which shows that investors' back-up call options or other risk control strategies are more than just speculation.

That's why Thomas Thornton, founder of Hedge Fund Telemetry, shorted the SPDR S&P Retail ETF (XRT). GameStop is the fund's biggest asset, and the debt-ridden online car retailer Carvana Co. (Another popular meme stock) is the second-most important.

“Trying to short some of these memes is too dangerous,” Thornton said. “God knows if the roaring Hello Kitty will keep posting. I don't need that kind of pressure in my life.”