According to Forbes, markets took a significant hit Tuesday with the S&P 500 falling over 1% and the Nasdaq dropping 2%. Small cap stocks were down more than 1.5% while the Dow gave up 0.5%. Pinterest shares plunged nearly 20% after weak earnings, and AMD slipped despite beating expectations. The cyclically adjusted price-to-earnings ratio hit its highest level since 1999, matching dot-com bubble valuations. Meanwhile, Microsoft, Amazon, and IBM all announced major layoffs in the past week as companies focus on efficiency.
Sponsored content — provided for informational and promotional purposes.
Dot-com déjà vu?
Here’s the thing that should make everyone nervous: we’re seeing valuations that haven’t been this high since the peak of the dot-com bubble. The CAPE ratio sitting at 1999 levels is genuinely concerning, especially when you consider the current economic environment. Corporate taxes are already at their lowest since 1939, which means we’ve probably seen the maximum possible boost from tax cuts. And yet markets are pricing in even more optimism? That math doesn’t quite add up.
What’s particularly interesting is how earnings growth is outpacing revenue growth this quarter. Basically, companies are getting more efficient rather than selling more stuff. And we’re seeing the human cost of that efficiency with all these tech layoffs. It makes you wonder – how much more fat can these companies trim before they start cutting into muscle?
The tariff wildcard
Now we’ve got the Supreme Court hearing arguments on Trump’s tariffs today, which adds another layer of uncertainty. Remember back in April when tariffs were first announced and markets sold off hard? We’ve recovered since then, but today’s hearing could reignite those concerns. The weird part is that inflation hasn’t really materialized the way everyone expected – probably because US companies are eating some of those costs themselves.
We won’t get a ruling for about three months, but the questions from justices during oral arguments might give us clues about which way they’re leaning. And honestly, the market hates uncertainty more than it hates bad news. A clear decision either way would probably be better than this limbo we’re in.
What’s next for markets?
So where does this leave us? We’ve got Qualcomm and Robinhood reporting after the close today, and both could move markets in different directions. Qualcomm’s new AI server chips could be a bright spot if demand is strong. But Robinhood? With bitcoin hovering around $100K and the stock down 8% recently, that earnings call could be rough.
The real question is whether Tuesday’s selloff was a one-off or the start of something bigger. Volatility stayed below 20, which is my personal “choppy markets” threshold, and bonds didn’t really move. That suggests we’re not seeing panic yet. But with valuations this stretched and multiple headwinds building, being cautious seems pretty reasonable right now.
Honestly, this feels like one of those moments where sticking to your long-term plan makes more sense than ever. Trying to time this market? Good luck with that.
