"This Time Is No Different"! Wall Street Analyst Warns of Bubble Burst as U.S. Stocks Rally

As the S&P 500 hit another record high on Monday, Julian Emanuel, chief equity strategist at Evercore ISI, warned that investors are growing overly optimistic about the stock market's recent rally—perhaps too optimistic.

The Market Has Grown Too Optimistic

With the Q2 earnings season underway, several Wall Street banks have raised their year-end targets for the S&P 500, which continues to reach new highs, painting a picture of a thriving U.S. stock market.

Yet, Emanuel senses danger beneath the euphoria.

In a weekend note, he wrote:

"Since the late 1990s, every structural bull market has ended with a surge in capital market activity and intense FOMO (fear of missing out) among investors."

Thus, Emanuel remains cautious about the recent rally, warning that the S&P 500 could see a 7%-15% pullback in the coming months.

Evercore's year-end target for the S&P 500 is 5,600, implying an 11% drop from current levels (~6,300).

"FOMO has begun," Emanuel wrote. "The market is overestimating the likelihood of sustained positive news."

He noted that even Wall Street veterans who lived through the dot-com bubble are now asking the most dangerous question in investing: "Is this time different?"—a clear sign that overconfidence, greed, and FOMO have taken hold.

"This Time Is No Different"

Signs of a bubble are already visible: Bitcoin at all-time highs, a crypto bull market, the rising popularity of zero-day options among retail traders, and AI hype fueling stock gains.

But this optimism may not justify further upside. In fact, excessive bullishness often signals an impending burst. Before the dot-com crash, 75% of AAII survey respondents were bullish—a level of optimism not seen since.

Will this time be different? Emanuel's answer is sobering: "This time is no different."

Good News Is Already Priced In

While bulls point to strong U.S. economic data and improving tariff conditions as tailwinds, Emanuel argues these positives are largely priced in. "Even tariff-related good news is arguably reflected in stock prices," he wrote.

The S&P 500's forward P/E of 24.7x is among the highest since 1960, though still below the dot-com bubble's 28x. Emanuel doesn’t foresee a crash but predicts a near-term pullback as investors ignore risks from ongoing tariff talks and potential bond market disruptions from the "Big and Beautiful" bill.

"Asking 'Is this time different?' shows investors are underestimating near-term risks," Emanuel wrote. "This time, it won’t be different."