Wall Street Is Nervous. Here's What 100 Years of History Says Happens to the S&P 500 Now.

1 hour ago 1

Steven Porrello, The Motley Fool

Mon, May 18, 2026 astatine 11:55 AM CDT 3 min read

Depending connected who you talked to, and connected what time you talked to them, the banal marketplace past week (the week starting connected May 11) was either euphorically uplifting, oregon concernedly jittery.

Indeed, contempt a crisp 1.2% pullback connected Friday, May 15, the iShares Core S&P 500 ETF (NYSEMKT: IVV) managed to compression retired a humble 0.1% summation for the week. That tiny summation says nothing, however, of the aggregate mid-week record-breaking highs driven successful ample portion by renewed chipmaker fervor and the awesome double-digit marketplace summation of market-debuting Cerebras Systems.

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The juggernaut of enthusiasm -- nevertheless invincible it seemed connected Thursday -- was blindsided by spiking enslaved yields connected Thursday night. This rattled the marketplace implicit fears of worsening inflation, and triggered a tech sell-off that sent each 3 large banal marketplace indexes down implicit 1%.

Person looking astatine laptop and clutching head.

Up close, this jumpy plaything whitethorn look puzzling. But from a distance, it truly isn't. The satellite continues changing time by time -- wars successful the Middle East, artificial quality (AI) -- and accelerated alteration implicit abbreviated periods isn't bully for the tense system.

History is beauteous wide connected what happens erstwhile the marketplace is particularly jittery. Take the S&P 500 Shiller CAPE index, for example. This valuation metric divides an index's terms by the past 10 years of earnings, offering a clear-sighted presumption of the banal market's existent valuation. If the past 100 years of past accidental anything, it's that the banal marketplace mightiness beryllium mounting itself up for a setback.

A CAPE ratio of 39.5 isn't the highest the S&P 500 scale has ever hit. Veteran investors volition retrieve erstwhile this metric deed astir 45 during the dot-com epoch -- conscionable earlier the bubble popped.

Does that mean the banal marketplace volition crush records similar it's 2000 each implicit again? Not necessarily. These are antithetic times, and the marketplace is being driven by antithetic factors. But the spread betwixt fundamentals and valuation is getting wider. That means today's winners volition request to beryllium those who tin outlast impermanent hype to present semipermanent value.

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