The Stock Market Sounds an Alarm Triggered Just Once Before. History Says This Will Happen Next.

The S&P 500 recorded a cyclically adjusted price-to-earnings (CAPE) ratio of 40.9 in June 2026, the second consecutive month above 40 and the first time since the dot-com bubble that the index has hit this threshold. Historically, the S&P 500 has never generated positive three-year returns following a monthly CAPE ratio above 40, with average returns suggesting a 30% decline by July 2029. However, some analysts argue the current AI boom may differ from the dot-com era, as AI has achieved mainstream adoption faster and could generate accelerating earnings growth that justifies current valuations.