How far is the current US bull market from historical bubble peaks?

Author: Zhao Ying

Source: Wall Street News

Goldman Sachs' latest assessment by its chief US equity strategist shows that current market exuberance has risen to the 86th percentile historically, approaching—but not yet touching—the extreme levels seen during the 2000 internet bubble and the 2021 bull market peak.

Over the past two months, the S&P 500 rallied 15% before Friday's pullback—a gain ranking at the 99th percentile since 1980. In his latest report, Ben Snider, Goldman Sachs' chief US equity strategist, noted that while none of the four historical bull market peak signals—speculative frenzy, deteriorating growth, massive equity issuance, and Federal Reserve tightening—have fully materialized yet, each is now closer to its trigger threshold than it was several months ago.

For markets, this assessment implies that the current bull run still has room to run, but risks are accumulating. Snider explicitly stated, 'We’re not there yet,' while cautioning that markets don’t need to wait for extreme investor euphoria before a downturn begins—the historical pattern may not necessarily repeat itself in this cycle.

The speed of this rebound has already left its mark in history. According to Goldman Sachs, the S&P 500 rose approximately 15% in about two months, yielding a return-to-volatility ratio—adjusted for realized volatility—of nearly 4, the highest level in over 50 years.

Artificial intelligence is the core theme driving this market move. AI-related stocks, momentum factors, and the broader market index have all risen in tandem, creating strong resonance.

Snider notes that unlike previous momentum-driven rallies (such as those at the end of 1999 and late 2021), this upswing is primarily supported by substantial recent upgrades to earnings expectations rather than pure sentiment-driven froth, lending it a more solid fundamental foundation to some extent.

To quantify current market sentiment, Snider constructed a composite assessment framework comprising nine indicators across four categories. Historical data show that during the peak of the 2000 internet bubble, the median ranking of these indicators reached the 100th percentile; at the 2021 bull market high, it stood at the 95th percentile. The current reading is at the 86th percentile—above the historical average but still notably below the extremes seen during those two prior peaks.

Specifically, Goldman Sachs’ speculative trading indicator has risen in recent months but remains below year-end 2025 levels and far beneath the peaks observed in 2000 and 2021. Among various speculative trading activities, trading volumes in high-valuation stocks have recently surged noticeably, while activity in loss-making stocks remains relatively muted. Additionally, call option volumes on equities and retail margin balances are both trending upward, signaling rising investor sentiment.

Notably, market breadth during this rebound has been extremely narrow, though it has not yet reached the extreme concentration seen during the internet bubble era.

Goldman Sachs’ analytical framework attributes the end of historically high-valuation, high-concentration bull markets to four factors: speculative mania, deteriorating growth outlook, excessive equity issuance, and Federal Reserve policy tightening. Snider points out that none of these four conditions fully apply to the current environment, but each has moved closer to its respective warning threshold compared to the start of the year.

IPO activity is showing signs of recovery, and pressure is beginning to build on the equity issuance side; rising input costs are compressing corporate profit margins, posing a potential threat to growth prospects; pricing in interest rate markets has started reflecting an increased probability of Federal Reserve rate hikes, although Goldman Sachs economists believe the actual likelihood of a hike remains low.

Snider also emphasized that market declines do not require extreme investor euphoria as a precondition, and the exuberance typically seen at past bull market peaks may not reappear in the same form during this cycle. This means that even if current indicators have not yet reached historical extremes, investors should not view this as sufficient assurance of a safety margin.

Overall, Goldman Sachs’ assessment offers a cautious but not pessimistic outlook: the current bull market’s level of exuberance is 'getting closer and closer' to historical peak ranges, though it has not yet arrived there. The key underpinning this view is that the current rally is still supported by improving earnings expectations—rather than being driven purely by sentiment. However, with momentum factors remaining strong, market concentration staying elevated, and certain risk signals quietly intensifying, Snider’s report effectively serves as a warning to investors: the window remains open, but it is gradually narrowing.

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