Good morning, investors. Ethereum, the second-largest crypto by market cap, had itself a weekend, jumping about 8% Saturday night while Wall Street was sleeping.

Crypto bulls expect that rally to persist through the end of year as alternative assets enter retirement accounts, institutions and ETFs keep adding digital assets, and retail maintains its enthusiasm.

And that momentum has made itself plenty obvious in the stock market, too.

BREAKING: Nvidia and AMD will reportedly pay 15% of its chip sale revenues in China to the US government, according to the Financial Times, as part of an unusual arrangement with the White House. More details here. 

Priced to perfection

The last time global stock markets were this expensive, dial-up internet was still cutting edge.

Neither start-and-stop tariffs, a hesitant Federal Reserve, nor geopolitics have stopped markets from extending a multi-year bull run in 2025.

AI enthusiasm has pushed valuations to unprecedented levels. More than 20% of stocks in the MSCI World index now trade above 10 times sales, according to Man Group.

That’s a larger share than the peak of the dot-com bubble.

“It’s one thing to justify these valuations when US 10-year Treasury yields are below 2%,” wrote Man Group strategists in a recent note.

“But with yields now around 4.5%, the justification becomes much harder to swallow.”

Historically, this degree of froth hasn’t been favorable to investors. 

When enterprise value-to-sales ratios top 10x:

• The median Russell 1000 stock has lost roughly 65% over the next five years

• The median MSCI World stock has dropped roughly 33%

Above 20x sales, the typical decline deepens to 73% and 50%, respectively. 

And despite those lofty price tags, the typical company in this group hasn’t been very profitable, Man Group strategists noted.

Median return on equity has hovered around zero in most years since 1999.

Forward price-to-earnings ratios tell a similar story.

Large-cap US stocks now hover well above their long-run average, and remain particularly elevated versus their small- and mid-cap peers, reinforcing the notion of a top-heavy market.

To be sure, today’s leading AI companies the Magnificent 7 are not Pets.com.

Nvidia, Meta, Microsoft and others report historic quarterly profits and command deep moats compared to the speculative names of the 1990s.

That economic durability, bullish investors say, justifies extreme valuations. 

Still, history has left a clear pattern. When interest rates are high and valuations are extremely stretched, the margin of error is — perhaps fittingly — extremely thin. 

Market snapshot

A top investor put 60% of his portfolio in this aerospace stock

We sent Best Ideas Club members this report on Sunday, explaining why a fund manager in our network — who has returned 800% since 2018 — went all in on this little-known mid-cap stock.

He expects the stock to double by mid-2026.

Elsewhere

📈 Ethereum is having its moment. After lagging bitcoin most of the year, the second-largest cryptocurrency by market cap has surged 16% over the last five days. It’s up over 50% in the last four weeks. (Yahoo Finance)

📊 The Fannie Mae and Freddie Mac IPO is coming this year. The White House is reportedly preparing to sell stock in the mortgage giants in an offering that could raise around $30 billion in the coming months. Fannie and Freddie have been under government control since 2008. (WSJ)

🚗 Trump’s tariffs are crushing automakers. For the latest quarter, companies including Toyota, Volkswagen, GM, Honda and Ford reported billions of dollars of extra financial burdens on account of the White House’s fresh levies. (Yahoo Finance)

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Rapid-fire

• The White House is considering conservative economist EJ Antoni to lead the BLS (WSJ)

• US container import demand and trucking markets have collapsed over the last month (FreightWaves)

• Chinese state media says Nvidia’s H20 chips aren’t safe for China (Reuters)

• Billions are flowing into new hedge funds focused on investing in AI (WSJ)

• White House crypto adviser Bo Hines announced he would leave his post to return to private sector work (Reuters)

• Bitcoin’s volatility has quietly shrunk compared to the last decade (Pomp Letter)

• The White House has opened the door for alternative assets like private equity and crypto to enter retirement plans (Barron’s)

Last thing

About me

📰 I’m Phil Rosen, co-founder and editor-in-chief of Opening Bell Daily. I’ve published books, lived on three continents, and won awards for my journalism, which has appeared in Business Insider, Fortune, Yahoo Finance, Bloomberg and Inc. Magazine.

I write our flagship newsletter to prepare you for each trading day — unpacking markets, economic data and Wall Street with analysis you won’t find anywhere else.

Feedback? Reply to this email, ping me on X @philrosenn, or write me directly at [email protected].

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