Good morning, investors. The bears are getting loud once again and calling out comparisons between today and history’s greatest market crashes.

Today we’re unpacking the most popular chart that people use to try and discredit the bull run.

The stock market hasn’t been this expensive since 1999 but it’s also the most profitable one in history.

As troubling as it may seem that the S&P 500’s cyclically adjusted price-to-earnings (CAPE) ratio has climbed to levels last seen at the height of the internet boom, the fundamentals underpinning the rise look equally as momentous. 

In the second quarter, S&P 500 net profit margins hit 16.9%, according to FactSet, the highest since the firm began tracking the figure in 2009. 

Pair that with 15% revenue growth and 50% earnings growth and it doesn’t come across as numbers you’d expect in a bubble.

Factor in 86% of companies beating estimates — above the five-year average of 78% — and the numbers make the CAPE number more palatable.

Because CAPE divides today’s price by a decade of inflation-adjusted earnings, the denominator is still carrying the pandemic’s collapse in profits as well as a less tech-dominant era when the index saw much thinner margins. 

But if you measure the market instead with forward earnings, it’s hovering right at 20 times earnings, just slightly above its 10-year average of about 19. 

Neither are perfect metrics but taking one without the other doesn’t tell the full story. 

To be sure, as Opening Bell Daily has covered, if you strip out Alphabet and Amazon from second-quarter results, earnings growth falls from 50% to about 30%.

Meanwhile, the rise of leverage in markets and the regularity of parabolic moves for single-name stocks raises their own questions of froth. 

That said, whatever your thoughts on the sustainability of it all, the 500 biggest companies in the world are nonetheless making more money than ever. 

The stock market in 2000, by comparison, peaked with single-digit margins. 

Today’s record earnings do not make the CAPE ratio less worthwhile of an indicator, but relying on it to draw a definitive conclusion of “another dot-com bubble” says more about the one brandishing the chart than the actual market. 

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🎯 President Trump will impose tariffs of up to 100% on imported drones and their components. AeroVironment, Kratos Defense and Red Cat all rallied Friday while the smaller stock Unusual Machines rose 24% on the report. (Quartz)

📊 Applied Materials posted record third-quarter revenue of $9.12 billion. It beat analyst estimates across the board with semiconductor-systems sales rising to $7.04 billion. (Yahoo Finance)

📉 July retail sales dropped 0.6%. That marked the sharpest monthly decline since May 2025. Online sales tumbled 2.2% and auto dealerships fell 2%. (CNN Business)

🗓 August 17, 1998: Russia devalued the ruble and defaulted on its domestic debt in what was then the largest sovereign default in history, which became a key domino to fall in the demise of Long-Term Capital Management.

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*Distributor: Foreside Fund Services. An investment in JEDI is not a direct investment in Shield AI.