It’s the question that seems to be hanging over every financial conversation right now: Are we partying like it’s 1999? Well, that’s not actually the question people are asking, but you get the idea (think: Are we in an AI-fueled bubble?). Two weeks ago, we touched on the current market valuations (click here) in the last section of our weekly update. And the parallels to the dot-com era of the late 1990s are certainly there. We have a world-changing technology, a stock market reaching new highs, and a palpable sense of excitement. However, some major players, like Meta’s Mark Zuckerberg and Amazon’s Jeff Bezos, have admitted we could be tipping into bubble territory.
But while history often rhymes, it rarely repeats in exactly the same way. A closer, data-driven look suggests that while the current market is undoubtedly expensive and showing signs of speculative froth, the extremes of the dot-com mania represent a unique chapter in market history that we have not yet revisited. The environment today is fundamentally different in several key ways.
A recent analysis by Alan Gula at Stansberry Research did an excellent job of quantifying this difference. Let’s walk through some of the key charts and data points that show why, for all the current excitement, we are still a far cry from peak dot-com territory.
The IPO Fever
Nothing captures the speculative mood of an era quite like the Initial Public Offering (IPO) market. When a company goes public and its stock price soars on the very first day, it’s a clear sign that investor enthusiasm, or “fear of missing out,” has taken the driver’s seat.
While we’ve certainly seen some successful IPOs this year, the environment doesn’t hold a candle to 1999. As the chart below shows, in 1999, the average first-day return for an IPO was an incredible 71%. The momentum continued into 2000, with an average pop of 56%. In contrast, the major IPOs this year have seen an average first-day gain of 35%. While that’s certainly a hot market, it’s operating at about half the temperature of the dot-com peak. The sheer volume was also on another level back then, with over 470 IPOs in 1999 alone. The dot-com era was defined by a mad dash to bring any company public with a “.com” in its name to a ravenous audience. Today’s market, while receptive to new issues, is far more selective.
A Look at the Long-Term Chart
The speed and sheer magnitude of the stock gains during the dot-com bubble were simply breathtaking. The poster child for this was Qualcomm, which rocketed 2,600% higher in 1999 alone. This wasn’t an isolated event; it was characteristic of a market that had become completely unhinged from reality.
From 1995 to its peak in March 2000, the Nasdaq-100 index soared by an astounding 1,080%. Since the pandemic lows in 2020, the Nasdaq-100 is up a very respectable 240%, but as the long-term chart below clearly illustrates, that move looks tame in comparison to the vertical ascent of the late 90s. The logarithmic scale of this chart is important; it means that equal vertical distances represent equal percentage gains. The slope of the line in the late 90s was nearly vertical, a true historical outlier that dwarfs all other bull runs.
Expensive, but Below the Peak
This brings us to the most direct valuation comparison: the forward price-to-earnings (P/E) ratio for the entire S&P 500. This metric is a good gauge of market sentiment because it looks at the price investors are willing to pay today for the profits companies are expected to earn over the next year.
As the chart below shows, the S&P 500’s forward P/E is currently around 23. Let’s be clear: this is expensive by historical standards and suggests that investors are baking in a lot of good news about future earnings growth. However, it is still meaningfully below the peak reached during the dot-com bubble, when the forward P/E ratio climbed to around 26. This is a critical distinction. It shows a market that is highly optimistic, but it hasn’t yet reached the stage of pure, unadulterated euphoria that characterized the absolute peak of the previous bubble. The market is pricing in a great future, but not an impossibly perfect one.
Counting the ‘Nosebleed’ Valuations
A forward P/E ratio over 100 is a “nosebleed” valuation, typically reserved for companies with truly explosive, and often unproven, growth prospects. The number of these companies in the market is a great barometer for speculative excess. During the dot-com peak, this club was much larger and its members were far more egregiously valued.
On March 24, 2000, there were 62 companies among the top 1,000 largest U.S. stocks with a forward P/E greater than 100. The median P/E of that group was a staggering 247. Today, that number has fallen to 29 companies, and their median P/E is a much lower (though still very high) 138. This shows that the most extreme forms of speculative valuation were simply more widespread and more severe back then.
We’re Not There
So, what’s the big picture here? The data makes a compelling case that while the current market is expensive and showing signs of speculation, it is not yet in the same manic territory as the peak of the dot-com bubble. The IPO market is more tame, there are fewer vertical price moves, the overall market valuation is still below the prior peak, and the number of absurdly valued stocks is far smaller.
This doesn’t mean we should be complacent. As the Stansberry report rightly points out, it does feel like “Things are getting crazy.” Valuations are stretched, and long-term returns from these levels are likely to be somewhat less attractive. The AI merry-go-round has been a profitable ride, but no one knows when, or if, the music will suddenly stop. For now, the data provides a comforting, if cautious, verdict: we are not yet reliving 1999.
(For those who want to dive deeper into the data, you can read Alan Gula’s original analysis on the Stansberry Research website here.)
Markets / Economy
- Markets washed out on Friday after President Trump threatened new tariffs on China following their imposition of new rare earth mineral restrictions. The S&P finished the week down -2.4%, the Nasdaq was down -2.5%, and the small-cap Russell 2000 was down -3.3%.
- Typical economic data releases are on hold due to the government shutdown. We’ll have to be patient as we ride this one out.
- The University of Michigan consumer sentiment came in at 55 in October, compared to 55.1 in September and forecasts of 54.2, according to preliminary estimates.
Stocks
- U.S. equities were in negative territory. Energy and Consumer Discretionary led the decline, while Utilities and Consumer Staples outperformed. Growth stocks led value stocks, and large caps beat small caps.
- International equities closed lower for the week. Developed markets fared better than emerging markets.
Bonds
- The 10-year Treasury bond yield decreased seven basis points to 4.05% during the week.
- Global bond markets were in positive territory this week.
- Government bonds led for the week, followed by corporate bonds and high-yield bonds.
