Wall Street’s fantasy land is running out of road. Goldman Sachs just dropped a bombshell—investors should expect a measly 3% annual return from the S&P 500 over the next decade. Three percent. That’s barely above mattress money. Adjusted for inflation? It’s a guaranteed loss. Welcome to the slow-motion crash.
The S&P 500’s CAPE ratio is at a blistering 37.0x—only two other times in history have valuations been this absurd. Once was the 2000 dot-com bubble. The other? Right before the Great Depression. Let that sink in. These levels don’t stick around for long. They collapse. The market is more overpriced now than at nearly any point in modern history, and yet, people are still piling in like it’s free money.
Meanwhile, liquidity is drying up. SPY’s trading volume has been scraping rock-bottom levels, barely hitting 20 million shares today. That’s a flashing red sign. Retail traders have been left holding the bag, gambling on the last fumes of a weakening altcoin frenzy while big money quietly steps back. Something is brewing, and when it hits, it’s going to hit hard.
Speaking of big money—hedge funds are making moves. The $SKEW index, which tracks deep-out-of-the-money put buying, just exploded past long-term resistance. That’s code for “something bad is coming.” When the smart money starts loading up on tail-risk hedges, it’s because they know what’s next. And what’s next? After OpEx Friday, things could get very ugly.
And then there’s the most shocking stat of all—the US stock market is now sitting at 289% of the M2 money supply. That’s the highest level since the dot-com disaster. In the last two years alone, this ratio surged by nearly 100 percentage points. It took three years for the same move in the late ‘90s. The Nasdaq 100’s M2 ratio has now blown past the infamous 2000 peak. In plain English? Stocks have outrun the money supply at a record pace, and history shows this never ends well.
The entire market is running on fumes. Valuations are at historic extremes, liquidity is vanishing, tail risk is soaring, and the big players are quietly bracing for impact. If you think this rally is sustainable, think again. The walls are closing in. The air is getting thin. The exit door is small.
Sources:
https://globalmarketsinvestor.beehiiv.com/p/the-us-stock-market-is-priced-in
https://x.com/i3_invest/status/1891986052191224257
https://x.com/dividendology/status/1891929175168106794
https://x.com/FinanceLancelot/status/1892018384419664379
https://x.com/KobeissiLetter/status/1891840140609237474