Even the most casual market observer knows that stocks have been on a tear. The headlines have focused on record highs, AI breakthroughs, and companies posting margins that seem to defy gravity. But behind the optimism lies a quieter story—one written in valuation ratios and history books—that suggests we might be entering a period where the market, quite simply, looks expensive. 

A Market That’s Priced for Perfection 

On a historical basis, the Shiller P/E ratio (CAPE) now sits around 39, more than double its long-term average near 17. The only other times valuations reached these levels were during the dot-com boom of the late 1990s and, briefly, before the 1929 crash. In both cases, the market didn’t stay there for long. 

Similarly, the Price-to-Sales (P/S) ratio for the technology sector has climbed to roughly 9.76, also near record highs. Tech stocks now account for over a quarter of the S&P 500’s total value—an incredible concentration considering that just seven companies (the “Magnificent Seven”) make up about one-third of the entire index. 

When valuations get this stretched, markets don’t need bad news to stumble—they just need the absence of good news...