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Good morning investors. Stocks are soaring but some strategists are turning defensive.

The bears have once again revived chatter of an age-old market question: Are we in a bubble?

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Charts for bulls and bears

Recent history has given Wall Street little to fuss about. 

The S&P 500 has climbed for six weeks in a row, it’s finished 10 of the last 11 months in the green, and it’s posted a 13% annualized return over the last 10 years. 

Stretch that to 30 years and the most popular benchmark index in the world has seen a total return over 1,177% despite multiple recessions and market crashes.

There is a clear lesson from the chart above: Stocks generally go up, especially when you zoom out. 

Apparently Goldman Sachs isn’t so sure.

None of the above kept the bank from publishing a glum, lost-decade outlook for the years ahead.

“We estimate the S&P 500 will deliver an annualized nominal total return of 3% during the next 10 years,” the bank’s portfolio strategy team wrote in a note October 18. 

In their view, the market’s current concentration and valuations look unsustainable.

The index’s biggest 10 names now make up more than one-third of the S&P 500’s total value — nearly the highest in a century, according to Goldman. 

The thing about market history is that it can look both bullish and bearish, depending how you slice it.

Case in point, while the above chart looks like an indisputable testament to market resilience, the one below looks like a portfolio warning. 

Popularized by Nobel-winning economist Robert Shiller, the CAPE — cyclically adjusted price/earnings multiple — tracks how valuations change by comparing stock prices to the prior decade of earnings. 

The data suggest the S&P 500 is more expensive than it was before the 1929 crash, and it’s on a similar trajectory seen ahead of the dot-com crash.

Elevated CAPE readings in the past have led to sharp corrections or flat returns, like in the years after 2000. 

Now, much of the recent ballooning in valuations can be chalked up to AI — the spending, investing and hype that followed OpenAI’s creation of ChatGPT in November 2022.

With Nvidia leading the way, stocks have only gone up since then. 

So, are we in a bubble? 

Not quite, according to strategists at Yardeni Research. But investors might be inching closer to “irrational exuberance” in the short-term.

“We don't believe that earnings growth is the main risk to relatively high valuation multiples,” the Yardeni team said.

“Rather, the downside risks are mostly attributable to the prospects of adverse geopolitical and domestic political developments through the end of this year…any selloff is more likely to be a correction than a bear market.”

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Elsewhere:

📈Nvidia hit $3.5 trillion in value. Shares of the chip marker gained more than 4% Monday to close at a record high valuation. It’s the second company behind Apple to ever achieve that market capitalization, and it’s inching closer to taking the title of world’s most valuable company from Apple. (Barron’s)

🏦 Slower Fed cuts sound good. That’s according to Federal Reserve Bank of Kansas City President Jeffrey Schmid. In his first public remarks since August, he said he hopes for “modest” and “gradual” adjustments to interest rates, and that policymakers should stay cautious. (Bloomberg)

🥇Gold keeps climbing. Once again bullion hit a record high on Monday — and so did silver. Silver futures briefly topped $34 per ounce for the first time in 12 years. Gold and silver have both beat the S&P 500 in 2024, gaining 26% and 35% year-to-date. (Yahoo Finance)

Rapid-fire:

• Trump’s tax plans could exempt 93 million Americans from income taxes (CNBC)

• BlackRock CEO Larry Fink said the presidential election “really doesn’t matter” for financial markets (FT)

• Disney plans to name Bob Iger’s successor in early 2026 (WSJ)

• The IMF chief said Monday that painful high prices aren’t going away anytime soon (Reuters)

• Famed short-seller Carson Block has no plans to bet against Tesla (Business Insider)

• Benchmark diesel prices saw their biggest one-week decline in nearly a year (FreightWaves)

Election odds according to Kalshi, the biggest US prediction market:

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