Evaluating Exuberance: A Probability, Not a Forecast

By Joseph Zappia, Co-Chief Investment Officer

This past week the market handed us something unusual: agreement. The velocity of the recent rally — the S&P 500 up roughly 13% since the end of March, one of the sharpest two-month advances in decades — has set off the familiar hunt for the top. And two of the most-read voices in the business, coming from opposite ends of the spectrum, landed in nearly the same place. A bulge-bracket strategy desk at Goldman Sachs Asset Management published a careful scorecard titled “Evaluating Exuberance.” Josh Brown, a widely-followed independent writer, published a piece arguing that the wave of mega-IPOs now lining up marks “the beginning of the end.” One is institutional and hedged; the other is plainspoken and contrarian. They differ on tone and they agree on substance. That convergence is worth our attention.

Let me be clear about what this note is and isn’t. It is not a forecast. I don’t know whether stocks are higher or lower in six months, and neither does anyone quoting a year-end target to the dollar. What I can do, and what I think is the only honest thing to do, is read the distribution of outcomes and ask whether we’re being paid for the risks embedded in it. That is a question of data and probability, not prediction.

The rally was real, and so is the anxiety

The numbers behind the move are genuinely extreme. Before Friday’s pullback, the S&P 500 had risen about 15% over two months — a 99th-percentile return relative to history since 1980. Measured against its own volatility, it was the most vertical advance in more than fifty years. And yet the index had gone essentially nowhere for the prior eight months, so the trailing one-year return is merely above-average, not euphoric. The combination of a violent, narrow surge layered on top of a flat year, carried by a single theme is exactly what unsettles people.

So the question on everyone’s mind is fair: have we moved too far, too fast? The useful answer is not yes or no. It’s “compared to what, and how confident should we be?”

What the data actually says: Elevated, but split

Here is where discipline matters. The Goldman scorecard assembles a panel of “exuberance indicators” and measures each against its own history. The finding is that today reads above average but well below the peaks of 2000 and 2021. The median indicator sits near the 86th percentile, versus the 95th in 2021 and the 100th at the dot-com peak. More important than the average is the dispersion. The signals do not agree with one another:

*Percentiles for market breadth, put/call ratio, and short interest are inverted, so that a higher number always means more exuberant.

The split tells a story. The hot readings cluster at the structural, professional end of the market: momentum, the trading of high-multiple stocks (near its largest share since 2000), and leverage (margin balances above their 2021 levels). The cool readings cluster in broad retail and bearish positioning: short interest sits near a multi-decade low, individual-investor sentiment is actually net-bearish, and the raw count of IPOs is merely average. In plain terms, the speculation is concentrated and sophisticated, not the wholesale, everybody-in-the-pool euphoria of a classic blow-off top.

A bearish writer quotes only the hot column. A bullish writer quotes only the cool one. The balanced reading holds both at once, and that ambiguity is the finding, not a failure to find one.

Speculation is a base rate, not a stopwatch

The most important point both sources make, and the one most likely to get lost, is that speculative excess is a terrible timing tool. Goldman says so directly. History says so louder.

Consider the analogy now making the rounds: not 1999, but the 1960s. In June 1964, a space-age company called COMSAT came public in a wildly oversubscribed offering; investors lined up to “get in on the ground floor” of the future. Soon companies were tacking “tronics” and “astro” onto their names with no change to their actual business, and the shares went vertical anyway. It was a real mania. But the market did not peak in 1964. On an inflation-adjusted basis it topped in 1966; the nominal high didn’t arrive until 1968. An investor who recognized the speculation in 1964 and stepped aside was, quite literally, early by years, and the bear market that eventually followed ground on for the better part of sixteen years.

That is the whole case for thinking in probabilities. A signal that reliably appears before a top, but with a lead time measured in years, is useless for timing and invaluable for positioning. It does not tell you when. It tells you that the shape of the distribution has changed — the left tail is fatter, the right tail is thinner — and that you should be compensated accordingly.

The one thing both flag as rising: Supply

If there is a single mechanism to watch, it isn’t sentiment. It’s supply. Goldman’s framework lists the conditions that have historically ended high-valuation, high-concentration bull markets: disappointing growth, a surge in equity issuance, and tightening monetary policy. Its conclusion is measured — none of these describes today, but each is closer than it was a few months ago.

The independent piece zeroes in on the same middle item with a sharper edge. After years of companies staying private and buying back their own stock, the largest names in AI and adjacent themes are now racing to sell shares to the public at the same time, and brokerages are slashing the minimums required to participate. The posture of the entire supply side has flipped from hoarding stock to distributing it. The argument is simple and historically grounded: bull markets don’t end because optimism runs out; they end because supply finally catches up to demand. Once everyone has access to all the stock they want, prices stop rising, and the mood, eventually, breaks.

Goldman’s own data is consistent with this even while staying calm: 2026 is on track for a record dollar value of US equity issuance, though relative to the size of the market it is still only back to its 2015–2019 average. So this is a condition that is building, not one that has arrived. Which is precisely the point.

What this means for portfolios

Put the pieces together and you get a conclusion that is neither bullish nor bearish, because the data supports neither pose. Speculation is elevated but not at a historic extreme. The froth is concentrated, not universal. Valuations and concentration are stretched — a handful of names still make up roughly 40% of the index — which caps the upside from further multiple expansion and deepens the downside from any disappointment. And the supply wave that has historically marked the late innings is rising, though not yet overwhelming.

None of that is a sell signal. It is an asymmetry. When the distribution skews against you, the right response is not to try to predict the turn, but to make sure the portfolio is built for a wider range of outcomes than the consensus expects. That means honest rebalancing away from the most concentrated, most-loved exposures; it means valuing the diversification you haven’t needed in a while; and it means resisting the pull to chase the part of the market that has run hardest precisely because it has run hardest.

The best time to do this is when it feels unnecessary. As Jesse Livermore put it a century ago, “there is nothing new in Wall Street … whatever happens in the stock market today has happened before and will happen again.” The names change. The arithmetic of risk does not. We don’t need to call the top. We just need to be honest about where we are.

Sources:
Goldman Sachs Global Investment Research, “Evaluating Exuberance,” June 5, 2026.
Brown, Josh. “The Beginning of the End.” Downtown Josh Brown, June 5, 2026. https://www.downtownjoshbrown.com/p/the-beginning-of-the-end

This material is for informational purposes only and is not intended to serve as a substitute for personalized investment advice or as a recommendation or solicitation of any particular security, strategy or investment product. Opinions expressed herein are based on economic and market conditions at the time this material was written, and do not necessarily reflect the views of LVW Advisors. Economies and markets fluctuate. Actual economic or market events may turn out differently than anticipated. Facts presented have been obtained from sources believed to be reliable. The views expressed are those of the author and they do not constitute investment advice or a recommendation to buy or sell any security. Figures referenced are drawn from third-party research and reflect data stated as of varying dates in late May and early June 2026. Past performance is not indicative of future results.