What 1973, 2000, and 2022 Can Teach Us About Today's Stock Market.     September 22, 2026

Whenever the stock market hits new highs, people ask whether it's headed for a fall. Three famous drops, in 1973, 2000, and 2022, each ended differently, and the differences are the most useful part. You may notice 1929 isn't on the list. I explain why below.

In the early 1970s, investors piled into about 50 well-loved companies known as the "Nifty Fifty." Then oil prices shot up, inflation reached double digits in 1974, and interest rates climbed. The S&P 500 fell about 48% and didn't regain its high until 1980, and took longer still after inflation. The takeaway: when inflation forces rates up, even great companies get repriced hard, and recovery can take years.

By late 1999, investors were paying record prices for internet companies, many with no profits. The Nasdaq lost about 78% and didn't recover until 2015. The S&P 500 fell about 49%. The Fed chair warned of "irrational exuberance" in 1996, yet the Nasdaq nearly quadrupled before crashing. The takeaway: stocks can look too expensive for years before they fall.

In 2021, money was cheap and speculation was everywhere: meme stocks, "blank check" companies, and Bitcoin near $69,000. Then inflation jumped and the Fed hiked rates quickly. The S&P 500 fell about 25% and the Nasdaq about 35%. But companies kept making money, so stocks recovered by early 2024. The takeaway: when borrowing gets more expensive, investors pay less for stocks, especially risky ones.

1929 is the most famous crash, but the weakest comparison for today. The Dow fell 89%, from 381 to about 41, and didn't recover until 1954. The cause was borrowed money: stocks bought with as little as 10% down, forced selling, and bank failures that turned a crash into the Great Depression. Today's margin rules and deposit insurance make that chain reaction far less likely.

So where are we today? Prices look like 2000. The CAPE ratio (cyclically adjusted price-to-earnings) compares stock prices to average earnings over 10 years. It is now about 41 and has been above 40 since May. Before this year, it had only been that high during the dot-com boom. Profits look nothing like 2000. Analysts expect S&P 500 profits to grow about 25% this year. The price relative to expected earnings is about 20, just above the 10-year average of 19. Interest rates look like 2022, with a touch of 1973. The Fed raised rates on September 16, and most officials expect at least one more hike this year. Even so, the S&P 500 closed at 7,637 on September 17, just over 2% below its record. Inflation is far below 1974's double digits, but rising rates and a few dominant stocks do rhyme with the Nifty Fifty era.

What Does This Mean for Your Investments? A high CAPE ratio says something about the next 10 years, not the next few months. The difference between 2000 and 2022 was profits: when they collapsed, stocks stayed down for years, and when they held, stocks bounced back in about 24 months.

So the real question isn't "Is the market too high?" It's "Can profits keep growing faster than interest rates rise?" Nobody knows. The old advice is still the best advice: don't put all your eggs in one basket, rebalance occasionally, and keep a healthy cash cushion so you're never forced to sell at a bad time.

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