Everyone knows you’re not supposed to bet on a bubble, but what about a potential bubble?

As the S&P 500 Index climbed above 5,000 on Friday, many of us found ourselves wondering what exactly we should call this market: a bubble or a durable new bull? Are we reliving 1995 — when, coincidentally, a previous "soft landing” economy pushed the Dow Jones Industrial Average above 5,000 en route to a 25% annualized return over the rest of the decade — or 1999, when the by-then-flimsy stock market edifice was on the verge of collapse? As is too often the case, it’s hard to know.

The 1990s parallels, of course, seem to pop up everywhere. Just as internet stocks were booming then, the 2023-24 market has been marked by breathless enthusiasm for the potential of artificial intelligence as well as wildly disparate guesses about how the technology will translate into future cash flows. Now, as then, market concentration is high and rising, and one stock encapsulates all of the market’s secular growth dreams and bubble nightmares (today: Nvidia; then: Cisco Systems).