Stock Market’s Historic Rally Faces Warning Signs as P/E Ratios Flash Red
The S&P 500 and Nasdaq have delivered exceptional annualized returns of 17% and 16.5% respectively since 2020, weathering two major drawdowns exceeding 19% in 2022 and 2025. Yet current all-time highs mask growing concerns as a rare valuation metric - appearing only once before in history - signals impending downside risk.
Price-to-earnings ratios across major indices now mirror levels that previously preceded significant corrections. While tech stocks continue leading the charge, the market's stretched valuation leaves little margin for error against macroeconomic headwinds like inflation or recessionary pressures.