Goldman Warns: Junk Stocks Could Be Next to Crack

Markets may be brushing up against record highs, but not everyone’s buying the hype. A senior trader at Goldman Sachs just sounded the alarm on a familiar target: low-quality stocks.

According to Louis Miller, managing director at Goldman, much of the recent rally in “junkier” corners of the market has been driven not by improving business fundamentals—but by short squeezes, where bearish investors are forced to buy back shares at higher prices. And now? That momentum is fizzling out.

Miller says non-profitable tech firms and meme stocks are looking vulnerable again. These are the same areas that spiked on hope and hype, only to tank when earnings reality hit. Positioning in these names is far more crowded than most investors realize, and the next big opportunity may be to bet against them.

“We think that time is getting closer,” Miller noted, pointing to recent price action as a sign that another leg down may be coming for the riskiest stocks.

The Nasdaq 100 and S&P 500 both notched solid gains on easing Middle East tensions and optimistic Fed signals, but Miller cautions that the underlying risk hasn't disappeared. Tariffs, global growth uncertainty, and sticky inflation are all lingering threats—especially for companies without earnings to fall back on.

He added that starting in July, elevated inflation data could slow growth further, hitting the most speculative parts of the market the hardest.

​Bottom line: While markets are celebrating short-term peace and policy clarity, Goldman sees danger building under the surface—particularly for lower-tier stocks that have ridden the rally without real earnings muscle.