The S&P 500 has delivered three consecutive years of strong gains, rising 24% in 2023, 23% in 2024, and roughly 16% in 2025, with the rally extending into 2026. The technology-heavy Nasdaq Composite has outperformed, climbing 43%, 29%, and 20% over the same periods. According to The Motley Fool, the surge has been driven largely by investor excitement around artificial intelligence.
Market Gains Concentrated in a Handful of Giants
A relatively small group of megacap companies — dubbed the "Ten Titans" — has powered much of the index's appreciation. The cohort includes Nvidia, Apple, Alphabet, Microsoft, Amazon, Tesla, Meta Platforms, Broadcom, Oracle, and Netflix. Their outsized influence means that weakness in just a few names could weigh heavily on the broader market during a downturn, creating concentration risk for investors who track the benchmark.
Valuation Metrics Flash Historical Warning Signs
The Shiller cyclically adjusted price-to-earnings (CAPE) ratio, which measures the S&P 500's price against its average inflation-adjusted earnings over the prior decade, now sits near 41. The long-term average is roughly 17. Readings at this level have appeared only a handful of times, most notably during the dot-com bubble. While an elevated CAPE does not guarantee an imminent crash, it signals that investors are paying historically high prices for earnings, which tends to limit future returns.
Buffett's Enduring Index Fund Advice
Warren Buffett has long warned against mistaking rising prices for attractive value. "Price is what you pay; value is what you get," he famously observed. Rather than trying to pick winners or time corrections, the Berkshire Hathaway chairman has consistently advocated a simpler approach: owning a low-cost S&P 500 index fund. In his 2013 shareholder letter, Buffett disclosed that his instructions for his wife's trust called for 90% of the assets to be placed in a low-cost S&P 500 index fund, specifically naming Vanguard.
Vanguard S&P 500 ETF in Practice
Berkshire put that philosophy into action in late 2019, purchasing 43,000 shares of the Vanguard S&P 500 ETF (VOO). The conglomerate held the position for roughly five years — through the pandemic, the 2022 bear market, and the early stages of the AI boom. With an annual expense ratio of just 0.03%, investors pay only $3 per $10,000 invested. The fund spreads capital across hundreds of businesses with diverse products, customer bases, and growth drivers, offering built-in diversification that single-stock bets cannot.
Why This Matters for Long-Term Investors
The S&P 500 has survived the dot-com collapse, the 2008 financial crisis, the COVID-19 crash, and numerous recessions, yet delivered an annualized return of about 10% from 1928 through 2025. For Bangladeshi diaspora investors and others building wealth across borders, the lesson is clear: timing the next bubble matters far less than holding diversified, high-quality businesses for decades. The Vanguard S&P 500 ETF remains a compelling core holding regardless of where AI valuations head next, offering exposure to established companies with strong balance sheets and the capacity to adapt across economic cycles.