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Investing.com -- The latest market rally carries some echoes of the late 1990s tech bubble, with major indexes at record highs and valuations stretched even as earnings continue to improve, according to Ed Yardeni, founder and president of Yardeni Research.
The Dow, S&P 500, Nasdaq, and Russell 2000 all hit new records last week, boosted by the Federal Reserve’s decision to cut rates by 25 basis points.
“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 Monday note.
“Perhaps,” he added. However, he notes that the current market’s advance has been supported by profits. Forward S&P 500 earnings per share rose to a record $294.91 during the week of September 18, moving toward convergence with the 2026 consensus estimate of $304.88.
Gains are not confined to megacaps. Mid- and small-cap indexes are also showing improvement, while the S&P 100 continues to outperform the broader market—echoing late-1990s dynamics.
Still, valuations are flashing caution. Yardeni flags that the S&P 500 forward price-to-earnings (P/E) ratio now stands at 22, not far below the 25 peak seen at the height of the dot-com bubble.
He continues to expect that the S&P 500 will reach 7700 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 said the “Roaring 2020s” — a hypothesized period that implies sustained economic growth, technological progress, and equity market expansion — remains his base-case scenario, with strong market gains expected through the rest of the decade, followed by a potential “Roaring 2030s.”
Since the 1920s, there have been four decades in which the S&P 500 rose more than 200%, and he believes the current rally could mark a fifth.