The Stock Market Is Repeating a Pattern Seen Only Once Since 1871. Here's What History Says Comes Next.
2026-10-12 18:30
•Katie Brockman •The Motley Fool
• • Axe Cap view
History Warns on High Valuations, But Quality Endures
With the CAPE ratio mirroring the 1999 dot-com bubble, risks loom, yet sticking to quality stocks pays off in the long run.
The S&P 500 and Nasdaq hitting record highs with a CAPE (cyclically adjusted price-to-earnings) ratio above 40 is a rare and uneasy sight, only once seen before—in 1999. Back then, valuations got dangerously stretched before the dot-com crash. South African investors might look at this and worry about their tech exposure in Naspers and Prosus, both heavily linked to global tech trends. Although these companies offer global growth, the stretched valuations imply downside risk if a major correction hits. One way to read this locally is through the USD/ZAR exchange: a global sell-off would likely strengthen the dollar against the rand, pressuring South African holdings. Historically, stepping away during bubbles means missing the recovery, but chasing peak valuations invites pain. Given this, a protective stance with some trimming in overvalued shares and holding proven blue chips like Standard Bank or AngloGold Ashanti—safer earnings amid volatility—makes sense. This view could be wrong if global inflation eases suddenly, sparking another tech-led rally, but caution is warranted. this is just our opinion and not financial advice
Trim speculative tech positions like Naspers and Prosus while holding resilient, quality names such as Standard Bank and AngloGold Ashanti. Watch the USD/ZAR closely for clues on risk appetite.
- Naspers
- Prosus
- Standard Bank
- USD/ZAR
- Unexpected global inflation decline boosting tech stocks
- Rand strength masking local market weakness
6/10
The S&P 500 and Nasdaq have reached all-time highs, but the CAPE ratio has surpassed 40 for only the second time since 1871, echoing the dot-com bubble of 1999. While this valuation metric historically signals overvaluation and precedes bear markets, history shows that long-term investors who stay invested in quality companies recover and thrive despite short-term volatility.
Our take is based on reporting first published by The Motley Fool.