The stock market has been in a rough patch lately, with major market indexes stumbling hard last week.
The S&P 500(SNPINDEX:^GSPC), Dow Jones Industrial Average(DJINDICES:^DJI), and Nasdaq Composite (NASDAQINDEX:^IXIC)all fell sharply from their recent all-time highs, with the Nasdaq plunging into correction territory.
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Stocks have also been repeating a pattern that’s reminiscent of the dot-com bubble burst, which could serve as a warning to investors right now. Fortunately, history says this foolproof strategy can protect your portfolio even if a crash is coming.
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Will the stock market bubble burst in 2026?
Tech and AI stocks were hit hard last week amid concerns that stricter regulation could limit growth. But some market metrics have been warning about valuations for months, with parallels to the tech boom in the late 1990s.
The S&P 500 Shiller CAPE Ratio is a metric that tracks the market’s overall valuation over time. Higher figures suggest the S&P 500 may be overvalued, and it’s historically had a strong inverse correlation with stock prices–meaning prices tend to fall after this metric peaks.
Since 1871, this metric has surged dramatically just a handful of times. Its most severe spike occurred in 1999, when it surpassed 40 for the first time in history. It remained elevated throughout the year, and in March 2000, the dot-com bear market officially began.
Shiller CAPE Ratio data by YCharts
Now, we’re seeing a similar pattern. The CAPE Ratio surpassed 40 for the first time since the dot-com bubble in May 2026, staying above that level for months on end.
To be clear, this doesn’t necessarily mean the market is headed toward a dot-com-style meltdown, even though tech stocks have been volatile lately. It does suggest, however, that the market is the most richly valued it’s been in decades, and eventually, overvalued stocks tend to correct themselves.
History says this is the best move to make right now
While the market has somewhat rebounded from its downturn last week, as of this writing, there’s no way to know whether it will continue rallying or whether this is just a temporary reprieve before another crash.
However, it doesn’t necessarily matter what the market does in the coming weeks or months, because history says the most effective strategy is to invest in quality stocks and hold them for the long term.
