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The S&P 500's cyclically adjusted price-to-earnings ratio has surpassed 40, marking the second-highest level in over 150 years of market history.
This valuation metric, which measures the index's value relative to its 10-year average inflation-adjusted earnings, has historically signaled major market corrections when it reaches such extremes.
The current bull market, which began in October 2022, has seen the S&P 500 surge nearly 120%, largely driven by the artificial intelligence boom.
However, market breadth remains narrow, with a handful of stocks powering index gains while over a quarter of S&P 500 constituents are down 40% or more from their all-time highs.
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