The ongoing market upswing shows signs reminiscent of the late 1990s tech bubble, with major indices hitting record levels and valuations stretching higher even as corporate earnings continue to rise, according to Ed Yardeni, founder and president of Yardeni Research.
Last week, the Dow, S&P 500, Nasdaq, and Russell 2000 all posted new highs, boosted by the Federal Reserve’s 25-basis-point rate cut.
“Is the stock market back on the road to the same irrational exuberance that inflated the Tech Bubble of 1999, which was followed by the Tech Wreck of the early 2000s?,” Yardeni asked in a note on Monday.
“Perhaps,” he added, noting that the rally has been underpinned by earnings growth. Forward S&P 500 earnings per share climbed to a record $294.91 during the week of September 18, approaching the 2026 consensus forecast of $304.88.
Strength is not limited to megacaps. Mid- and small-cap indexes are also posting gains, while the S&P 100 continues to outperform the broader market, mirroring patterns seen in the late 1990s.
Nonetheless, valuations warrant caution. Yardeni points out that the S&P 500 forward price-to-earnings (P/E) ratio now sits at 22, only slightly below the 25 peak reached during the dot-com era.
He maintains his forecast that the S&P 500 could hit 7,700 by the end of 2026.
“If the stock market parties like it’s 1999 in response to the Fed’s monetary easing, then we might get there sooner as a result of a meltup that could be followed by a meltdown,” Yardeni wrote.
“If so, the hangover this time isn’t likely to be as severe as the one that followed the Party of 1999, in our opinion,” he added.
Yardeni also said his base-case scenario remains the “Roaring 2020s,” a period marked by sustained economic expansion, technological advancement, and rising equity markets, with further market gains expected through the decade and the possibility of a “Roaring 2030s” to follow.
Historically, there have been four decades since the 1920s in which the S&P 500 rose more than 200%. Yardeni believes the current rally could mark a fifth such decade.
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