With the S&P 500 (^GSPC) trading near record highs and valuations approaching levels last seen during the dot-com bubble, strategists are rethinking what normal looks like for today’s market.
Bank of America equity strategist Savita Subramanian is among those making the case.
“Perhaps we should anchor to today’s multiples as the new normal rather than expecting mean reversion to a bygone era,” Subramanian wrote in a client note on Wednesday.
That shift in thinking reflects a broader recalibration across Wall Street, driven by accelerating artificial intelligence adoption and resilient earnings growth.
Sam Stovall, chief investment strategist at CFRA Research, told Yahoo Finance that while valuations remain elevated compared to long-term averages, they look more justifiable when measured against the past five years — a stretch marked by megacap leadership and strong fundamentals.
“Over the past 20 years, the S&P 500 is trading at roughly a 40% premium to its long-term average on forward estimates,” he said. “But on a five-year basis, when mega-cap tech began to dominate market cap and earnings growth, that premium shrinks to a high single-digit range.”
In other words, what looks expensive through a decades-long lens may be far more justified in today’s tech-driven market structure.
The debate over valuations has also spilled beyond Wall Street research desks and into the broader investor community.
Fed Chair Jerome Powell acknowledged this past week that markets look “fairly highly valued,” a comment that drew comparisons to former Fed Chair Alan Greenspan’s 1996 “irrational exuberance” speech, which was delivered more than three years before the dot-com bubble actually burst.
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In a LinkedIn post on Friday, Sonali Basak, chief investment strategist at iCapital, noted the parallels and shared a warning from Barry Ritholtz, chief investment officer at Ritholtz Wealth Management, who pointed out that trying to time the top can be a costly mistake.
After Greenspan’s famous warning, “the market ended up rallying for years,” Basak wrote, citing Ritholtz’s observation that investors who stayed on the sidelines missed a fivefold rally in the Nasdaq before the eventual crash.
“If you’re an investor trying to guess where the top is, your odds are very much against you,” Ritholtz told Basak.
That historical lesson is shaping today’s narrative, as strategists weigh high multiples against still-solid growth, robust earnings, and record cash on the sidelines.
