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Unprofitable Shares Surge 18% in Bizarre Market Rally
21 Jan
Summary
- Unprofitable tech stocks index gained 12% in early 2026.
- Heavily shorted stocks index jumped 18.3% in 13 trading days.
- Easier financial conditions may favor riskier companies.
The US stock market is experiencing an unusual surge in its least-favored shares. As of January 21, 2026, Goldman Sachs' index of unprofitable technology stocks has risen 12% this year, reaching its highest point since January 2022 before a recent setback. Even more dramatically, the index tracking the most heavily shorted US stocks has jumped 18.3% in just 13 trading sessions this year.
This rally in 'garbage' sectors is puzzling given the broader market's performance; the S&P 500 is down 0.7% and the Nasdaq has dipped 1.2% in early 2026. Analysts suggest that narrowing junk bond spreads have created easier financial conditions, disproportionately benefiting riskier companies. Retail investors, who significantly influence trading volume, might also be playing a role, echoing their activity in 2020-2021.
The sharp nature of this rally suggests potential short squeezes, which could lead to losses for hedge funds. There's also speculation that this could be a precursor to another 'quant quake,' similar to events seen in recent years. While past 'quant tremors' did not significantly impact the broader market, ongoing vigilance is advised regarding this unusual trend in the stock market's junkier segments.
