Inflation worries are back. So is volatility. Have you seen this movie before? Maybe – and you can learn from parts of it.

Last week’s market movements reminded investors that stronger fundamentals do not eliminate air pockets. The June 5 sell-off followed stronger labor data, higher Treasury yields, and renewed concerns that the Fed may have less room to ease. The highest-momentum parts of the market suffered the most, especially AI-linked growth and semiconductors. Volatility rose from a low level as investors reassessed the bar for richly valued leadership.

This does not mean the cycle has broken. It means the market is becoming less forgiving.

In times of uncertainty, it can be tempting and even informative to examine what feels like historical precedent, while bearing in mind that moments in time don’t exactly mirror each other.

Given the current state of play, what might be apt periods for comparison?

Minus the energy-price shock, today’s backdrop bears resemblance to two different periods in the 1990s.

1. As they were in 1994 (when the U.S. also hosted the World Cup), investors today are navigating a complicated mix of inflation (a 4.2% CPI print for May 2026), rates, and potential policy moves. Liquidity is no longer easy. Fiscal policy is a central driver to asset prices. And once again, this will require the Fed to get its rate decisions right for the U.S. economy to remain strong.
2. Meanwhile, the strength of the business cycle, aggregate capex spending, and thematic market drivers (especially AI) may make it feel a little like the late ‘90s.

What’s different about the current market environment, however, is the earnings and breadth.

Over the last five years, S&P 500 earnings growth (+106%) has exceeded total returns (+96%), whereas from 1995 to 1999, total returns (+251%) ran well ahead of earnings growth (+119%). The earnings support (EPS growth divided by total return) is much higher over the most recent five-year period.

One caveat: An easy 2021 versus 2020 comparable (a recovery from the worst economic effects of COVID-19) skewed the 2021 to 2025 growth rate meaningfully. But even the four-year comparison that removes 2021 (1996–1999 vs. 2022–2025) shows more earnings support in the more recent period.

Exhibit 1: Unlike the dotcom era, earnings strongly back the returns

Source: FactSet as of 6/4/26. EPS and S&P 500 total return calculations reflect compounded growth over the respective 5-year and 4-year periods. Earnings support% = EPS growth/total return %.

Leadership is broadening—slowly

A lesser known but constructive feature of the current market is that leadership is not quite as narrow as the headlines imply.

As of June 11, performance of the cap-weighted S&P 500 has reversed with the equal-weighted S&P 500, about 6.3% versus 8.3%, respectively. The index is still very concentrated in the top 7-to-10 components. However, participation has broadened beyond the largest names.

Also, 60% of S&P 500 stocks are now trading above their 200-day moving average. This does not eliminate concentration or thematic risk, but it does suggest this cycle is resting on a wide foundation.

Where the historical comparisons differ

The AI build-out remains a major tailwind, but higher long-end yields, Brent crude back in the low $90s, and a forward P/E near 20x are raising the bar for richly valued leadership.

The recent volatility makes the message more urgent: this market can still work, but investors may need broader participation, stronger earnings support, and a greater margin of safety than they needed earlier in the rally.

The SpaceX IPO reinforced that same point. Its debut had a late-1990s feel because investors were again underwriting a transformational technology platform at a massive valuation.

But the IPO market itself looks different from the dot-com era. Then, hundreds of early-stage companies came public on narrative, promise, and often limited earnings visibility. Today, the pipeline is narrower, larger, and later-stage, reflecting years of private-market capital formation before companies reach public investors. The distinction is concentration—fewer companies, but much larger ones.

Portfolio implications

Bonds: The 1990s showed that strong growth can coexist with meaningful rate volatility, especially when the Fed is still reacting to inflation and financial conditions. Today’s backdrop is similar in that stronger data can quickly pressure duration, but different because yields now provide more income cushion than investors had for much of the post-GFC period. Shorter duration and higher-quality bonds may offer a more balanced way to participate without overextending on rate or credit risk.

Stocks: As in the late 1990s, innovation remains the market’s central narrative. But the portfolio takeaway should be different from simply chasing the most exciting growth theme. With valuations elevated, leadership concentrated, and volatility rising, investors may want exposure to durable AI beneficiaries while also leaning into broader earnings participation across the equity spectrum.

With this in mind, advisors may want to suggest to their clients that they sit down and review the breadth of their portfolios. Some of the broadening opportunities may be hiding in plain sight. For example:

• Leadership among large caps has increased, creating security selection opportunities.
• Equity income-related stocks offer less thematic concentration (AI, in particular) than the S&P 500 in aggregate.
• Small caps have seen an improved earnings outlook and may offer select opportunities.
• The same is true in developed international, which has benefited from a weaker dollar.
• Inflation dynamics and flows alongside elevated commodity prices may make the case for select stocks in the materials sector.

What’s the lesson? The comparisons to the 1990s are useful, but incomplete. Then, returns increasingly outran earnings and IPO enthusiasm broadened into excess. Today, the market may have speculative pockets, but earnings support, broader participation, and higher starting yields argue for discipline rather than retreat.