TL;DR

Valuations echo the year 2000

The US stock market finds itself in unusual territory. According to analysis published by Nasdaq Markets, the S&P 500 is currently the second most expensive market in history as measured by the cyclically adjusted price-to-earnings ratio – known as the CAPE ratio or Shiller P/E. The only time valuations have been higher was in 2000, when the dot-com bubble burst and triggered a market decline that took more than two years to bottom out.

The CAPE ratio measures stock prices against average inflation-adjusted earnings over the preceding ten years. It is used as a long-term valuation gauge that has historically demonstrated an ability to predict weaker returns in subsequent decades – although timing remains notoriously difficult.

The stock market is repeating a pattern last seen in 2000 – history sounds a warning - Bilde 1

What history says about what comes next

When the CAPE ratio has reached comparable levels in the past, subsequent returns have typically been below average. The dot-com collapse from 2000 to 2002 sent the S&P 500 down nearly 50 percent from peak to trough. It is important to stress, however, that historical patterns are not guarantees – elevated valuations can persist for extended periods, and new factors such as artificial intelligence and structural shifts in the business landscape may justify higher multiples than historical norms.

According to the CAPE ratio, the S&P 500 is more expensive than in 99 percent of all historical monthly observations – the sole exception being the dot-com peak in 2000.

Analysts are divided on what this means. Optimists point out that today's technology companies actually generate profits, unlike many of the internet companies of the early 2000s. Pessimists remind us that high valuations eventually meet gravity.

The stock market is repeating a pattern last seen in 2000 – history sounds a warning - Bilde 2

Crypto moves in lockstep with the stock market

An important piece of context in 2026 is that digital assets can no longer be viewed in isolation from the stock market. Bitcoin is trading on Sunday, August 30, at $79,161, and the broad Fear & Greed Index stands at 69 out of 100 – a level indicating a clear risk-on sentiment in the markets.

Research shows that the 30-day correlation between Bitcoin and the S&P 500 has frequently exceeded 70 percent over the past five years. Clara Medalie, research director at Kaiko, noted in August 2022 that "crypto and equity markets have been trading closely together, with record-high correlations" – a trend that experts largely attribute to institutional players treating Bitcoin as a risk asset on par with growth stocks.

"When institutions go risk-off, their models sell Bitcoin in exactly the same way they sell the Nasdaq. The asset class doesn't matter. The risk category does."

This marks a significant shift from Bitcoin's early years, when the coin marketed itself as a hedge against traditional markets. During the COVID crash in March 2020, Bitcoin fell more than 50 percent in two days – in parallel with equity indices. In the bear market of 2022, the cryptocurrency plunged around 65 percent from its November 2021 peak, and the total market capitalization of the crypto market fell from $2.9 trillion to below $800 billion.

Parallels to the dot-com era

The parallels drawn to the dot-com bubble go beyond valuation levels. Analysts point to structural similarities: speculative investments driven by technology optimism, projects funded on hype rather than demonstrated profitability, and rapid expansion in market capitalization without corresponding earnings growth.

$2.95T
Dot-com sector peak valuation (2000)
$2.9T
Crypto market peak valuation (2021)

The dot-com sector reached a market capitalization of $2.95 trillion in 2000 – inflation-adjusted, that equates to nearly $5 trillion in today's money – before collapsing to $1.2 trillion. The crypto market reached its peak valuation of approximately $2.9 trillion in November 2021.

An important caveat

It is worth emphasizing that the CAPE ratio alone is not a precise market-timing tool. Ratio levels that appeared extreme in 2017 and 2018 were eclipsed by further gains through to 2021. Many economists, including Robert Shiller – who invented the CAPE model – caution against using it mechanically as a timing instrument.

History provides patterns, not guarantees. But for investors assessing risk in a market priced at near-historic levels, there are few reasons not to know that history well.

Sources: Nasdaq Markets, Kaiko Research, publicly available correlation research.