S&P 500 EPS Soars 28%, Echoes Dot-Com Era; Bear Market Risk Mounts

S&P 500 companies are on pace to report a 28.4% year-over-year surge in first-quarter earnings per share, the strongest since 2021’s Q4, but historical data warns such explosive profit growth can presage a bear market, according to MarketWatch columnist Mark Hulbert. The S&P 500’s last peak EPS growth in late 2021 was followed by the 2022 bear market within months. In March 2000, EPS growth reached 32.8% just before the dot-com collapse. Ned Davis Research shows that when annual EPS growth exceeds 20%, average index returns are barely positive, far below long-term averages. Conversely, periods of EPS declines of 10%–25% tend to deliver the best returns. Analysts forecast 20%-plus EPS growth for the next three quarters, per FactSet. Because markets are forward-looking, they often discount economic peaks ahead of downturns. A composite of long-term valuation indicators currently reads at the 99th percentile historically, signaling extreme overvaluation and reinforcing the bearish backdrop.