Goldman Sachs finds 9 indicators show rising market exuberance

Goldman Sachs' research team published an analysis of nine different indicators to gauge stock market exuberance, concluding that while the U.S. equity market is closer to dangerous bubble territory than it was a few months ago, the overall risk assessment remains below levels seen in prior manias.

"The indicators collectively suggest elevated but not extreme levels of exuberance," said David Kostin, chief U.S. equity strategist at Goldman Sachs, in the June 8 note. "We are closer to a bubble than we were in early 2026, but the composite reading still falls short of the 2000 or 2021 peaks."

The nine indicators span valuation multiples, sentiment surveys, IPO activity, margin debt, retail flow concentration, options volume, corporate insider selling, equity issuance, and volatility term structure. Goldman's composite shows that five of the nine have crossed into "elevated" territory, with IPO activity and retail options trading registering the highest readings. The S&P 500 traded at 21.5x forward earnings as of June 5, above its 10-year average of 17.8x but well below the 25x-plus multiples of the dot-com era.

The analysis arrives as a broader debate over market froth intensifies. JPMorgan Chase CEO Jamie Dimon warned on May 27 that deal activity feels "gung-ho" and that the current environment echoes 1972, 1986, 2000 and 2007 — years that preceded major downturns. Bridgewater Associates founder Ray Dalio told Bloomberg Television on June 3 that his proprietary bubble indicators show U.S. equity markets "rising close to — not at — the same level in 2000 and the same level in 1929."

Where the indicators diverge

Goldman's framework distinguishes between price-based signals and fundamental ones. Valuation metrics such as the S&P 500's price-to-sales ratio rank in the 89th percentile of historical ranges, while the equity risk premium — the excess return investors demand over risk-free assets — has compressed to 180 basis points, near the 10th percentile. Those readings flash caution.

But other indicators tell a more measured story. Margin debt as a share of market capitalization sits at 1.8%, below the 2.4% peak in late 2021. Corporate insider selling as a percentage of total trading volume remains within normal bounds, and the VIX, while occasionally spiking above 20, has averaged 16.5 over the past three months — below the 25-plus readings that typically accompany full-blown stress events.

The U.S. 10-year Treasury yield stood at 4.32% on June 5, up 12 basis points on the week after a stronger-than-expected jobs report, while the DXY index held near 104.5. The cross-asset picture shows equities absorbing higher rates without a systemic repricing — a dynamic that Kostin's team flagged as a risk if yields continue climbing.

What comes next

Goldman's research does not call an imminent top. The composite indicator has been at or above current levels for sustained periods before without triggering a crash, most notably during the mid-2010s bull market. But the note warns that the narrowing of the equity risk premium leaves less room for error: if earnings growth fails to meet the 14% consensus for 2026, the valuation floor could shift lower.

The S&P 500 closed at 5,847 on June 5, down 1.2% on the session after the jobs data, with technology and consumer discretionary sectors leading the decline. The Nasdaq 100 fell 1.8%, while the Dow Jones Industrial Average lost 0.6%. Trading volume on U.S. exchanges reached 12.8 billion shares, 15% above the 20-day average.

This article is for informational purposes only and does not constitute investment advice.