The S&P 500 bull market has reached a valuation milestone not seen in nearly a century, with the index’s market capitalization climbing to 212% of U.S. gross domestic product—its highest level since 1929, according to CME Group research published in early June 2026. The rally, which began in October 2022, has delivered a 92% gain over its first three years, and the index is up 11.25% year-to-date through May 2026, driven primarily by accelerating corporate earnings growth.
Strong profit expansion is powering the advance. The S&P 500 is expected to report earnings growth of 23% for the full year 2026, according to FactSet data from mid-June, with Q1 2026 earnings tracking at 27.7% year-over-year growth—the fastest pace since late 2021. Goldman Sachs raised its year-end 2026 forecast for the S&P 500 to 8,000 on May 28, up from an earlier 7,600 target, citing the strength of earnings expansion as a key driver of the projected 6% additional return from late May levels.
The valuation comparison to 1929 reflects the index’s price-to-GDP ratio, one of several metrics showing historically elevated levels. CME Group economist Erik Norland noted in a June 2 analysis that when adjusted for current 10-year U.S. Treasury yields, equities are trading at their highest historic premium relative to long-term bonds. The cyclically adjusted price-to-earnings (CAPE) ratio, which smooths earnings over a decade, hasn’t been this elevated since 2000, while price-to-book and price-to-sales ratios have both surpassed dot-com bubble levels.
However, the earnings momentum distinguishes this cycle from past peaks. Unlike the 2000 and 2007 bear market precursors, when corporate profits began declining before the stock market peaked, earnings expectations continue to expand rapidly. The forward price-to-earnings ratio, which reflects analyst expectations for the next 12 months, stood at 20.32 as of June 12, 2026—not significantly elevated by historical standards. This compression of the forward P/E ratio even as stocks rally suggests the market is being supported by genuine profit growth rather than multiple expansion alone.
Credit conditions also show few signs of stress. High-yield corporate bond spreads remain narrow, indicating investors see limited distress among companies, though Norland cautioned that implied volatility on S&P 500 options has begun rising in a pattern of higher highs and higher lows since hitting a low in 2024. This modest uptick in volatility, combined with stretched top-line valuation metrics, suggests the rally may become increasingly choppy, though the absence of widening credit spreads and deteriorating earnings guidance means a peak may not be imminent.
Sources
- CME Group — S&P 500 market cap at 212% of GDP, highest since 1929; analysis of valuation metrics and market peak indicators
- FactSet — S&P 500 earnings growth of 23% expected for full year 2026
- Berkshire Edge — Q1 2026 S&P 500 earnings growth of 27.7% year-over-year
- Goldman Sachs — Raised S&P 500 year-end 2026 forecast to 8,000 on May 28, 2026
- Yahoo Finance — S&P 500 up 92% since October 2022 bull market start
- Boston Partners — S&P 500 up 11.25% year-to-date through May 2026
- StreetStats — Forward P/E ratio of 20.32 as of June 12, 2026
