The Stock Market Is Flashing a Warning Last Seen Decades Ago, and the Federal Reserve Just Made President Trump's Tariffs Even Riskier. Here Is What History Says Could Happen Next.

Core Insights - The S&P 500 has gained 17% in 2025, indicating a potential for a third consecutive year of double-digit percentage gains [2] - Artificial intelligence (AI) continues to be a significant theme driving the stock market, alongside the technology, energy, and industrials sectors, with investor sentiment around President Trump's tariffs also influencing performance [3] Market Metrics - The S&P 500 has a forward price-to-earnings (P/E) multiple of 21.8, which is approximately 10% higher than its five-year average and 18% above its ten-year average [6] - The current forward P/E multiple is at its highest level in decades, comparable to levels seen during the COVID-19 pandemic and the dot-com bubble [7][8] - The S&P 500 Shiller CAPE ratio is at 40.7, a level only previously seen in 2000 at the peak of internet euphoria, raising questions about the sustainability of the current rally [9] Economic Context - The Federal Reserve has indicated that Trump's tariffs may lead to higher prices in the long run, despite cooling inflation [8] - U.S. unemployment is currently at its highest level in four years, which adds complexity to the economic landscape [8]