It’s not breaking news to say that the S&P 500 has been on a historic run the last few years.
At time of this writing in May 2026, the S&P 500
has more than tripled from the COVID lows in March of 2020. That works out to an annualized average return of over 23% compared to the long-term average of roughly 10% on the S&P 500 since the index was first introduced in 1957.
There are a variety of factors that have contributed to this, including increased federal debt, economic expansion, and rising
corporate earnings.
The rise of Artificial Intelligence innovation and investment has pushed the technology sector’s share of corporate profits – and its weight inside of many stock market indices – to fresh all-times highs.
Today the 10 largest companies inside the S&P 500 make up roughly 40% of the index. The S&P 500 has not been this
concentrated since the turn of the century, which preceded the tech bubble burst in March of 2000. The argument for market dynamics being different than the tech bubble of the late 90s is centered on business fundamentals –revenue and earnings – being real this time.
At the same time, earnings multiples – how much investors are paying per dollar of corporate earnings – are elevated. Today the S&P 500’s 12-Month Forward Price/Earnings Ratio (how much an investor is paying per dollar of the next year’s earnings) sits above its 5-Year and 10-Year averages and well above its longer-term average. In short, the ‘margin
of safety’ at the index level is low.
The purpose of this writing is to not call for another bubble but to encourage readers to take stock of how much of these magnificent companies they own inside of their portfolios.
History tells us it is time to reap, not continue to sow.
Source: Barron’s, FactSet