London Daily

Focus on the big picture.
Wednesday, May 13, 2026

Beware the 'melt-up:' Analysts say stocks may soar just before they collapse

Beware the 'melt-up:' Analysts say stocks may soar just before they collapse

Storm clouds appear to be gathering over Wall Street, with many analysts saying a downturn is inevitable. But before the party winds down, some expect an explosive pre-crash rally — known as a "melt-up."

Melt-ups usually occur without any obvious economic reason for the gains. They happen when investors buy assets based on greed, or fear of missing out, instead of fundamental improvements.

First, some quick context: The past five years have been very, very good for investors. The S&P 500 has grown by nearly 90%, and the tech-heavy Nasdaq has grown over 140%. That includes two years of a pandemic that shuttered businesses and snarled global supply chains.

Now the market is grappling with the sobering reality that all bull runs end eventually.

Market watchers say that time may be near amid high inflation, an increasingly hawkish Federal Reserve and geopolitical turmoil. Recently JPMorgan CEO Jamie Dimon warned of "storm clouds on the horizon," former New York Fed president Bill Dudley said he believes a recession is "inevitable" and the yield curve is inverted — when short-term debt pays out more than long-term debt, considered a sign that a bear market could be ahead.

Yet some analysts are predicting a stock market melt-up, in a rush of irrational buying that sends assets soaring just before the bull market's collapse.

Logically, the market has to reach a top before it falls. But historically, there has been a significant acceleration toward that top in the final months before a crash: In 1928, one year ahead of the Great Depression, the Dow hit new highs before crashing by almost 90%. Before its collapse in March 2000, the Nasdaq grew nearly 200% in the 18 months prior.

Currently, sentiment data shows investors are feeling very bearish about the direction of the market, and that they have been for the past two years — during which the S&P 500 returned 75%.

Analysts, meanwhile, are more bullish on individual stocks than they have been in the past decade. Of all the stock ratings on Wall Street, more than 57% are currently "buy" ratings, the highest percentage since September 2011, according to an analysis by InvestorPlace.

"That tells me all the bad news is discounted in the market right now," said David Hunter, Contrarian Macro Advisors' chief macro strategist. "We're at an inflection point for bonds, stocks, rates and the dollar."

Investors are fearful of the Fed tightening monetary policy, Hunter says, but he thinks that inflation is reaching a peak and the tightening cycle will soon end. A quarter-percentage-point rate hike, he says, is meaningless when stock market and home values are nearly 30% above pre-pandemic levels and unemployment is historically low.

"We believe that, if the yield curve inverts, the data says the stock market will have a massive 'melt-up' over the next two years. We're talking 20% or greater gains," wrote Luke Lango, InvestorPlace senior investment analyst.

Hunter predicts that the next quarter or two will bring huge gains to investors, but the fall will also be significant. As stocks continue to soar, investors risk becoming complacent just as prices take a nosedive.

In the heat of a melt-up, investors may feel a keen sense of FOMO. But when the melt-up inevitably melts down, they may be happy they waited it out.

Newsletter

Related Articles

0:00
0:00
Close
The Great Western Exit: Why Best Citizens Are Fleeing the Rich World [PODCAST]
The New Robber Barons of Intelligence: Are AI Bosses More Powerful Than Rockefeller?
The End of the Old Order [Podcast]
Britain’s Democracy Is Now a Costume
The AI Gold Rush Is Coming for America’s Last Open Spaces [Podcast]
The Pentagon’s AI Squeeze: Eight Tech Giants Get In, Anthropic Gets Shut Out [Podcast]
The War Map: Professor Jiang’s Dark Theory of Iran, Trump, China, Russia, Israel, and the Coming Global Shock [Podcast]
Labour Is No Longer a National Party [Podcast]
AI Isn’t Stealing Your Job. It’s Dismantling It Piece by Piece.
Lawyers vs Engineers: Why China Builds While America Litigates [Podcast]
Churchill’s Glass: The Drunk, the Doctor, and the Myth Britain Refuses to Sober Up From
Apple issues an unusual warning: this is how your iPhone can be hacked without you doing anything
Kennedy’s Quiet War on Antidepressants Sparks Alarm Across America’s Medical Establishment
The Met Gala Meets the Age of Billionaire Backlash
Russian Oligarch’s Superyacht Crosses Hormuz via Iran-Controlled Route
Gunfire Disrupts White House Correspondents’ Dinner as Trump Is Evacuated
A Leak, a King, and a Fracturing Alliance
Inside the Gates Foundation Turmoil: Layoffs, Scrutiny, and the Cost of Reputational Risk
UK Biobank Breach Exposes Health Data of 500,000, Listed for Sale on Chinese Platform
KPMG Cuts Around 10% of US Audit Partners After Failed Exit Push
French Police Probe Suspected Weather-Data Tampering After Unusual Polymarket Bets on Paris Temperatures
CATL Unveils Revolutionary EV Battery Tech: 1000 km Range and 7-Minute Charging Ahead of Beijing Auto Show
Crypto Scammers Capitalize on Maritime Chaos Near the Strait of Hormuz: A Rising Threat to Shipping Companies
Changi Airport: How Singapore Engineered the World’s Most Efficient Travel Experience
Power Dynamics: Apple’s Leadership Shakeup, Geopolitical Risks in the Strait of Hormuz, and Europe's Energy Strategy Amidst Global Challenges
Apple's Leadership Transition: Can New CEO John Ternus Navigate AI Challenges and Geopolitical Pressures?
Italy’s €100K Tax Gambit: Europe’s Soft Power Tax Haven
News Roundup
Microsoft lost 2.5 millions users (French government) to Linux
Privacy Problems in Microsoft Windows OS
News roundup
Péter András Magyar and the Strategic Reset of Hungary
Hungary After the Landslide — A Strategic Reset in Europe
Meghan Markle Plans Exclusive Women-Focused Retreat During Australia Visit
Starmer and Trump Hold Strategic Talks on Securing Strait of Hormuz Amid Rising Tensions
Unofficial Australia Visit by Prince Harry and Meghan Expected to Stir Tensions with Royal Circles
Pipeline Attack Cuts Significant Share of Saudi Arabia’s Oil Export Capacity
UK Stocks Rise on Ceasefire Momentum and Renewed Focus on Diplomacy
UK to Hold Further Strategic Talks on Strait of Hormuz Security
Starmer Voices Frustration as Global Tensions Drive Up UK Energy Costs
UK Students Voice Concern Over Proposal for Automatic Military Draft Registration
Rising Volatility Drives Uncertainty in UK Fuel and Petrol Prices
UK Moves to Deploy ‘Skyhammer’ Anti-Drone System to Strengthen Airspace Defense
New Analysis Explores UK Budget Mechanics in ‘Behind the Blue’ Feature
Man Arrested After Four Die in Channel Crossing Tragedy
UK Tightens Immigration Framework with New Sponsor Rules and Fee Increases
UK Foreign Secretary Highlights Impact of Intensified Strikes in Lebanon
UK Urges Inclusion of Lebanon in US-Iran Ceasefire Framework
UK Stocks Ease as Ceasefire Doubts in Middle East Weigh on Investor Confidence
UK Reassesses Cloud Strategy Amid Criticism Over Limited Support Measures
×