High Valuations, Real Earnings: Why Today’s Market Isn’t 2000 All Over Again

There’s no debating that the S&P 500 is selling at the upper end of its historical P/E range, driven mostly by large technology companies. But is it a bubble? In my opinion, no—not in the way 2000 was. Back then, we had “no real business” dot-coms. Today, it’s Amazon, Google, Meta, and Microsoft - massive, free-cash-flow-generating companies with durable earnings power. That said, a 20% correction (similar to what we saw in 2022 or April 2025) wouldn’t surprise me. Any spike in volatility could lead investors to take profits. Still, I don’t currently see signs of a 1970s- or 1980s-style inflation surge or a 2008-2009-type liquidity crisis.

While not a repeat of the ’70s inflation era, I believe the real wild card is energy costs—and how rising energy prices might reignite inflation and push interest rates higher. If we experience a normal to colder-than-normal winter, and if our assessment that global oil inventories and spare capacity are tighter than consensus proves correct, energy prices could climb significantly. That would likely pressure P/E multiples—but our energy holdings would serve as a natural hedge in that scenario.

This week, Amazon, Google, Meta, and Microsoft all reported results that beat estimates. Each also said demand for AI continues to exceed current capacity—so AI investment and spending remain strong. More broadly, Q3 corporate earnings have been solid, and guidance for Q4 has been revised upward. The U.S. economy continues to outperform counterparts. Looking ahead, the 2026 tax laws for accelerated depreciation and R&D tax credits should further support reshoring, domestic investment, and capital expenditures.” Jim Brilliant, CFA, CIO.