If you’re feeling a mix of FOMO, dread, and déjà vu watching stocks, you’re not alone. Wall Street’s major indexes are still climbing, even as investors whisper about an equity bubble. A Bank of America survey found 91% of fund managers think US stocks are overvalued—yet those same managers remain more bullish than they’ve been in months. That’s classic bubble behavior: concern about valuations doesn’t stop the buying spree.
Valuations now stand at historic extremes: S&P 500 at 22x forward earnings, price-to-earnings ratios near internet bubble highs, and tech stocks like Nvidia, valued above $4 trillion, have become the “must-own” names. Beneath the surface:
- The VIX volatility index dropped below 15, signaling investor calm
- Record trading in short-dated options and penny stocks suggests risk appetite is back
- Many unprofitable firms have tripled in value since April
Why are prices still climbing despite rising risks? Easy money, record buybacks, and a “there’s no alternative” mindset keep the rally going. But there’s an uncomfortable disconnect: actual profit growth lags share price inflation. If investors suddenly turn, the selloff could be fierce—especially given how concentrated gains are in a handful of megacap stocks.
