A Once-in-a-Generation Stock Market Warning Just Appeared. Investors Might Not Like What's Coming Next.

The stock market is hitting fresh highs, but one valuation metric points to rough waters ahead.

The last time the S&P 500 was this richly valued was in the late 1990s, just before the dot-com crash.

Picking companies with strong fundamentals has been one of the best ways to prepare for a market downturn.

As of this writing on Aug. 5, the S&P 500 (SNPINDEX: ^GSPC) is trading at its highest level ever. It is on track to notch its sixth consecutive day of gains. Already, the S&P 500 index is up roughly 13% in 2026; if this bull market continues, the index will close 2026 with its fourth consecutive year of double-digit gains -- a multi-year streak not seen since the mid-90s dot-com era.

There's another similarity between today's bull market and the dot-com era's bull market. And while it doesn't mean today's market will meet the same fate as the dot-com crash, it is a strong warning that a downturn is likely coming. Here's what I mean.

Missed Nvidia in 2009? This Rare Signal Is Flashing Again. In 2009, a "Double Down" signal flashed for a little-known chipmaker called Nvidia. For the first time in years, that same "Total Conviction" signal is flashing for a company 1/100th the size of Nvidia. Continue »

The S&P 500 Shiller CAPE ratio compares the S&P 500's current price with its average inflation-adjusted earnings over the past decade. Looking at a full decade of earnings, rather than just one or two years, helps smooth out the market's ups and downs. It's one of the most widely followed indicators of the stock market's valuation. And it has gotten seriously high.

As the chart above suggests, the CAPE has averaged about 16-17 over the last 150 years. Notice, for instance, that the CAPE has exceeded 24 only a handful of times. Many of those periods ended in some of the worst market crashes in history , including the Great Depression and the dot-com crash.