The S&P 500 is up 12% in 2026, driven largely by AI enthusiasm, though sharp recent drops in the S&P 500 and Nasdaq Composite reflect worries about sticky inflation, high bond yields and AI financing. Valuation gauges look stretched: the CAPE ratio is around 41, more than double its historical average of 17.8, and has stayed above 40 only during the dot-com bubble, when it peaked near 44 in December 1999. The Buffett indicator sits around 237%, or $2.37 of market value for every $1 of annual U.S. GDP. The author argues today's market differs because many of the largest companies are highly profitable, and the indicator can overstate valuations since many S&P 500 firms earn revenue overseas. Since neither metric signals when a correction will come, the article suggests reassessing portfolio risk, especially AI and speculative tech exposure, and favoring established blue-chip companies with strong balance sheets and cash flow.
Summary written by Upside AI from the original article. Read the source for full details.
Read the original on Yahoo Finance ↗
Keywords
S&P 500valuationartificial intelligenceNasdaq
Open a keyword to see other news on the same topic.
Related tickers and likely impact
SPY
▼ Likely negativeSPDR S&P 500 ETF
Relevance: medium
| Market | US stocks |
|---|---|
| Sector | ETF |
| Close on 10/21/2026 | 773.13 |
| Change that session | +0.53% |
Impact is scored by AI from the headline and may be wrong. It is not investment advice.
Related news
- The Market Is Triggering a Warning Not Seen in Decades . Here What History Says Comes Next .
The S&P 500 has doubled over the past four years after falling nearly 20% in 2022, and its CAPE ratio is now at its second-highest level ever. The CAPE ratio averaged 17.8 since 1879 and crossed 40 only twice: first from January 1999, peaking at a record 44 in January 2000, and again in May of this year. In 1999 the S&P 500 still gained 20%, but it then lost more than 40% over three years while the Nasdaq-100 lost almost three-quarters. The article stresses that bull markets cannot last forever, yet bear markets have historically been shorter, and the S&P 500 is up 771% since its 2003 bottom despite the 2008 and COVID-19 crashes.
- We Are Witnessing the Stock Market Do Something for Only the 2nd Time in 155 Years , and History Is Clear About What Comes Next
The S&P 500 is still up about 12% this year but has fallen nearly 2% from its record high set earlier this month, while the Nasdaq Composite is more than 4% below its high, as sticky inflation and rising bond yields weigh on investors. The Shiller CAPE ratio has stayed above 40 for a few months, a level reached only once before in 155 years of data, during the dot-com bubble, versus a long-term average of about 17.4. The U.S. stock market's value relative to GDP stands near 244%, above the 200% threshold Warren Buffett once warned means 'playing with fire.' The author suggests investors should lower expectations for returns over the next decade, but says a crash is not guaranteed. As an example, $1,000 invested in an S&P 500 ETF at the March 24, 2000 peak would have grown to more than $5,000 today, before dividends.
- We Are Witnessing the Stock Market Do Something for Only the 2nd Time in 155 Years, and History Is Clear About What Comes Next
The S&P 500 is up about 12% this year but has slipped nearly 2% from its recent record, and the Nasdaq Composite is more than 4% below its high as sticky inflation and rising bond yields weigh on tech stocks. The Shiller CAPE ratio has stayed above 40 for months, a level reached only once before in 155 years, during the dot-com bubble, versus a long-term average of about 17.4. The stock market's value relative to GDP, around 244%, also exceeds the 190% level reached in the dot-com era, and Warren Buffett warned that a ratio approaching 200% means “you are playing with fire.” The author argues today's leading companies have real earnings unlike many dot-com stocks, and that CAPE signals lower returns over the next decade rather than a guaranteed crash. A $1,000 investment in an S&P 500 ETF made at the March 24, 2000 peak would have grown to more than $5,000 before dividends.
- Wall Street climbs after SpaceX third-quarter earnings
SpaceX shares jumped Wednesday, lifting the Nasdaq and the broader market after the company reported 161% third-quarter revenue growth and ninefold growth in its AI business. Cresset chief market strategist Joe Zidle said SpaceX is not an anomaly and that such strong results may become more common across the sector. The S&P 500 rose 0.58% to 7,757.22, the Dow gained 0.69% to 52,857.10, and the Nasdaq Composite climbed 1.05% to 26,702.86 on technology strength. The dollar edged lower against most major currencies in a quiet session, while Germany's DAX gained 1.35% and the S&P/TSX rose 0.60%, and Hong Kong's Hang Seng fell 0.90% and Japan's Nikkei 225 rose 0.85%.
- Stock Market Midday, Oct. 21: Tech Gains Lift Nasdaq as SpaceX Soars
As of 11:41 AM ET, the Nasdaq Composite rose 1.09% to 26,717 on renewed optimism around AI, while the S&P 500 gained 0.52% to 7,752 as tech gains offset telecom weakness. The Dow Jones Industrial Average climbed 0.29% to 52,647 on positive corporate reports. Gold was up 0.18% at $4,132.42, and the 10-Year Treasury yield slipped to 5.11%. SpaceX surged over 10% after its quarterly results boosted AI sentiment, lifting Dell Technologies, which rose 6% in early trading.
- U.S. stocks end on mixed note Tuesday, Dow Jones stars
The S&P 500 closed at 7,712.75, up 0.29%, while the Dow Jones Industrial Average gained 1.02% to 52,497.42, led by industrial stocks. The Nasdaq Composite slipped 0.02% to 26,424.82 as tech stocks lagged, even though AI stocks firmed after recent sell-offs. Jake Behan of Direxion said the link between AI-driven growth and higher rates is being tested, and hyperscaler earnings over the next few weeks will be the next major stress test for the AI trade. The U.S. dollar weakened against major currencies, with EUR-USD up 0.21% to 1.1236 and GBP-USD up 0.57% to 1.3381. Globally, European indices drifted lower and Asian markets diverged, with Hang Seng, Nikkei 225 and KOSPI falling while Indonesia's IDX Composite rose 5.65%.
Related markets
Latest news
- OpenAI nears up to $30 billion funding round at $1.25 trillion valuation led by UAE investors
OpenAI is nearing a funding round of up to $30 billion at a $1.25 trillion valuation, led by UAE investors alongside Coatue, with that valuation excluding the new capital. The company aims to get signatures by the end of next week, though the final size is still being determined. The raise is positioned as an “opportunistic” bridge ahead of a potential IPO, which CFO Sarah Friar has told employees will likely come in 2027. OpenAI is also negotiating a commercial deal that would secure more computing capacity from the UAE. The move comes amid choppy tech markets, with jitters around CoreWeave and concerns about financing as interest rates rise, while Anthropic's expected IPO will test investor appetite. OpenAI has filed confidentially to go public.
- Here's what is spooking investors as Meta stock stumbles
RBC Capital Markets analyst Brad Erickson says Meta shares are under pressure after earnings, with the language in the company's filing unsettling investors. He explains that Meta is issuing non-voting stock to fund billions in AI spending while preserving CEO Mark Zuckerberg's voting control. Erickson said the dilution level cited, nearly 800 billion, is probably well above the actual investment, and that the CFO described that language as boilerplate. He also noted the move lets Zuckerberg keep control and stay in California while a tax situation is being worked out.
- A lesson from poker tells us not to fold on Meta after its earnings sell-off. Here’s why
Meta's strong quarterly results were overshadowed by concerns over AI spending, sending shares down 7% on Thursday. Bears point to dilution risk, as Meta plans new non-voting Class C shares to fund AI infrastructure and free cash flow turned negative in the quarter. A New Mexico judge also ordered Meta to pay a $25 billion penalty over the Cambridge Analytica scandal, which the company plans to appeal, and Meta booked a $9.89 billion legal settlement charge in the quarter. Bulls argue the core business remains strong, with the new Muse app off to a strong start, and CFO Susan Li said in-house content models are outperforming prior versions in offline tests.
- Resideo Announces Expected Q1 Software Update to Honeywell Home Smart Thermostats for Compatibility with Apple HomeView
Resideo plans to release a software update in the first quarter of 2027 that will let its existing Honeywell Home ElitePRO, X7S and X8S smart thermostats support the new Adaptive Temperature Control and Clean Energy Guidance features tied to Apple's HomeView offerings. Homeowners can get these features without replacing devices or paying for extra professional installation. The thermostats already work with Apple Home, Google Home, Amazon Alexa and other ecosystems and are Matter certified. Resideo says it works with more than 100,000 professionals worldwide, who bring its products into more than 15 million installations annually.
- Why Nokia Sank today
Nokia shares fell 15.4% on Thursday, as of mid-afternoon, in a sector-wide sell-off of AI-related stocks, even though the company beat earnings expectations. Third-quarter revenue rose 9.7% to 5.15 billion euros, adjusted EPS rose 50% to $0.09, and operating margin expanded 220 basis points. AI and cloud customer revenue jumped 123% and order intake for that segment rose 118%, while mobile networks grew only 5%. Nokia reiterated but did not raise its full-year 2026 guidance, and the article says high expectations after the stock's rally this year, along with fears about the sustainability of AI spending, weighed on shares.
- Google Is Paying SpaceX $11 Billion a Year for Compute. Here's the Concentration Risk Nobody Is Pricing In.
Google has started paying SpaceX $920 million per month, or $11 billion per year, to lease xAI's cloud infrastructure through 2029, rather than building more data centers to fill its shortage of Nvidia GPUs. According to Synergy Research Group, Google held 15% of the global cloud infrastructure market in the second quarter of 2026, placing third behind AWS (28%) and Microsoft Azure (20%), while Google Cloud revenue rose from $19.2 billion in 2021 to $58.7 billion in 2025. The deal gives Google access to a cluster of roughly 110,000 GPUs, and Alphabet owns a 4%–5% stake in SpaceX. The author warns the arrangement adds concentration risk: Google is effectively funding xAI's growth into a cloud competitor, it reinforces Nvidia's dominance, and the cluster sits at xAI's centralized facilities, including Colossus in Tennessee, where power failures or disruptions could affect many tenants.
Get the briefing on Telegram or Zalo
Join the Upside Telegram channel or Zalo group for the Vietnam stocks and gold briefing at 8:00 and 19:00 (Vietnam time) on trading days, plus a weekly wrap on Saturday morning.