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Markets continue to set new highs, with artificial intelligence stocks contributing to recent momentum.

This has prompted the question: "Are we in a bubble?"

While concerns are understandable, history suggests that bubble fears often reflect investor psychology as much as market fundamentals.

And the result?

Short-term uncertainty — but also long-term lessons for disciplined investors.

Market history shows that investors frequently worry about bubbles that never fully form.

• After 2008, "bubble" concerns persisted, yet that decade became the longest bull market on record.Source: Bloomberg, FactSet
• Earlier this year, the S&P 500 Index declined 19% before rebounding within three months.- FactSet

Short-term pullbacks occur regularly. Attempting to time them can risk missing recoveries.

Valuation measures such as the Shiller P/E ratio currently sit above long-term averages.

- Robert Shiller, Yale

This suggests higher prices relative to earnings, but it does not reliably predict near-term returns.

Key reminders:

• Valuations reflect what investors are willing to pay based on expectations, not guarantees of future outcomes.
• Strong fundamentals can allow higher valuations to persist.
• Current market leaders generally show stronger profitability compared with many companies during the 1990s tech bubble.

While valuations can adjust downward if prices fall, they can also improve through earnings growth.

Some areas of the market trade at higher valuations (e.g., Large Growth), while others such as Value or Small Cap stocks reflect different valuation profiles.

- FactSet

• By Style/Size: Valuations differ across categories, providing investors with potential opportunities for balance.
• By Sector: AI-related companies are concentrated in Technology, Communication Services, and Consumer Discretionary. Other sectors, such as Financials and Industrials, have exhibited different valuation dynamics.

These examples highlight why diversification across multiple areas may help reduce concentration risk. This does not suggest that any specific style or sector will outperform.

History shows that patient investors are often rewarded over longer horizons.

- S&P Dow Jones Indices

• Even severe declines — such as those during the tech and housing bubbles — appear less disruptive when viewed over decades.
• Approaches such as dollar-cost averaging can help manage volatility by spreading investments over time.
• Starting at lower valuations may improve returns, but maintaining discipline is often more important than timing entries.

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