After nearing a bear market just three months ago, stocks are expensive again — trading above the value of their underlying assets, with analysts saying we're heading down a frothy path.

Why it matters: Markets might be rallying on vibes rather than fundamentals, while ignoring headwinds like tariffs.

• Investors don't have clarity on how tariffs will impact corporate earnings, but they're trading like they don't care.
• That could be a flashing warning sign while markets are "complacent" and money managers are on vacation.

What they're saying: "Markets can stay overbought for longer than many expect because greed tends to outlast fear," wrote Bank of America's Michael Hartnett in a recent note.

Zoom out: Investors ideally aim to price stocks in line with their earnings potential to avoid sharp corrections when reality catches up. But here's what's happening in the market now:

• The S&P 500 is trading at 22 times forward earnings, above the historic average of 18.
• The current earnings yield, 4.5%, is near its lowest level relative to long-term real yields since the tech bubble.
• Extreme greed is driving the market, according to CNN's Fear & Greed index.
• The Relative Strength Index, a measure of momentum, has hit above 70 several times this month, which is overbought territory.

Zoom in: Here are some other "toppy" signals we're watching:

• Nvidia created and entered the $4 trillion club, and Trump's posting about its share price.
• Assets under management in leveraged ETFs, which are riskier investments, hit a record high of $135 billion.
• Business travel is so back, according to Delta Air Lines.
• Meta offered a $200 million+ salary for top AI talent.
• Jeff Bezos had a $50 million wedding and sold $666 million worth of Amazon stock.
• Our own anec-data: Your Markets author is experiencing a slew of invites to international bachelorette trips, after a few blissful months of pivots to domestic travel due to economic fears.

Between the lines: If prices run away from earnings, "the market is basically saying we're gonna grow into these valuations," Morgan Stanley Investment Management's chief investment officer Jim Caron tells Axios.

Yes, but: Regarding the valuation issue, some analysts say that's not the best metric anymore.

• The index is of higher quality today than it historically has been, with record corporate buybacks to boot, making valuations defensible, according to Bank of America's Savita Subramanian.

💭 My thought bubble: A recent rewatch of "The Big Short" was a good reminder in this TACO moment that it's not always what you don't know that hurts you as an investor.

• It's what you think you're certain of.

Thank Big Tech for helping power the S&P 500 to its eighth record high of the year.

• That dominance could also be the market's biggest vulnerability.

Why it matters: Nearly half of the S&P 500's earnings growth this year is coming from tech. That kind of concentration raises the stakes — and the risk — if the sector falters.

What they're saying: "The whole vibe on the current tech stonks conversation reminds me ... a lot of dot com before the crash," wrote Patrick Moorhead, founder of Moor Insights & Strategy, in a post on X.

• "Instead of [Nvidia] we were piling money into [Cisco]," Moorhead wrote.

Catch up quick: The turn-of-the-century dot-com bubble — when hype drove a surge in tech stocks, which burst when earnings didn't justify valuations — is a cautionary tale that investors would be wise to remember.

• Cisco is one of the poster children for the bubble, and often draws comparisons to Nvidia.
• At its peak valuation, Cisco traded at 200 times forward earnings. Nvidia is less than 40 right now, with the profit growth to back it up.

💭 Thought bubble, from Axios Pro Rata author Dan Primack: It's not just public companies, either. Venture capitalists mostly agree that they overspent and overvalued between 2020 and 2022, leading to a glut of stranded unicorns.

• 2025 is looking like a replay, with stratospheric startup valuations that often eclipse the ZIRP era. Median U.S. VC deal valuations are higher so far in 2025 than during the peak, save for a slight decrease for Series D+ rounds, per PitchBook.

Yes, but: Elevated prices don't necessarily mean we're in bubble territory.

• Unlike the early 2000s, today's tech giants have earnings and cash flow to back up their valuations, Sanctuary Wealth's chief investment strategist Mary Ann Bartels tells Axios.

The bottom line: The question is whether the tech rally is happening because of investors hyping up stock prices, or because of strong earnings that demand these higher multiples.

• The coming earnings season should answer the question.

The S&P 500's price-to-earnings, or P/E ratio, is climbing again — now sitting above its five- and 10-year averages, according to a chart from FactSet.

• The P/E ratio is one of the most-watched metrics on Wall Street, measuring how much investors are willing to pay for a dollar of earnings, and the ratio has been steadily climbing since April's lows.

Why it matters: Sooner or later, prices and earnings need to align — meaning either profits rise to justify valuations, or stock prices come back down to earth.

Driving the news: Second-quarter earnings season kicks off this week.

• Analysts forecast a 4.8% profit increase for S&P 500 firms in the second quarter, per FactSet.
• That's below the 13% growth from the first quarter of the year.
• Analysts' estimates for second-quarter earnings have come down significantly off the back of tariff concerns, which could make it easier for firms to surprise to the upside.

The bottom line: The bar is high for companies to deliver profits that can justify current stock prices.