Wonka: Step in, Charlie. Grandpa Joe, sir. This is the Great Glass Wonkavator.
GRANDPA JOE: It’s an elevator.
WONKA: It’s a Wonkavator. An elevator can only go up and down, but the Wonkavator can go sideways and slantways and longways and backways . . .
CHARLIE: And frontways?
WONKA: . . . and squareways and frontways and any other ways that you can think of. It can take you to any room in the whole factory just by pressing one of these buttons. Any of these buttons. Just press a button and ZING! You’re off. And up until now I’ve pressed them all . . . except one. This one. Go ahead, Charlie.
CHARLIE: Me? (He pushes the button.)
WONKA: There it goes. Hold on tight. I’m not exactly sure what’s going to happen. Faster, faster . . . If we don’t pick up enough speed, we’ll never get through.
CHARLIE: Get through what?
WONKA: Ah-ha!
GRANDPA JOE: You mean we’re going . . .?
WONKA: Up and out!
GRANDPA JOE: But this roof is made of glass. It’ll shatter into a thousand pieces. We’ll be cut to ribbons!
WONKA: Probably. Hold on, everybody. Here it comes!
Investors & Friends,
Whether you are a wide-eyed Charlie or a cynical Grandpa Joe, we are all along for the ride on the Wonkavator here in 2025 with 23 all-time-highs for the S&P 500 in the third quarter, the third-most in a quarter since 1990 with the index sitting 35% higher than at the lows we saw in April.
These new highs have pushed the biggest tech companies to gargantuan sizes. Nvidia alone has gained $2.5 trillion of market capitalization just since those April lows.
And the top 10 US stocks are now larger than any other country’s entire stock market by a sizable margin.
I am old enough to remember the quaint old days of 2018 when Apple became the first trillion-dollar company to much fanfare. Nvidia lost $600 billion in one day back in January when the Chinese Deepseek AI model was released. Oh, how times have changed.
Saying “trillion” is like saying “light-year.” These are terms that the human mind does not have an easy time understanding. So, to help with that here is a visualization of what it would look like if you stacked up $100 bills to $1M, $1B, and $1T stacks.
Yea, that’s a lot.
Visualized another way, here is how the entire pharmaceutical sector stacks up against Nvidia. These are not small companies.
And predictably, along with the rise in the size of mega-cap tech, the “market” has continued to look ever more expensive, with the size-weighted S&P 500 price-to-sales ratio higher than the tech bubble in 1999 or the 2021 meme stock / crypto frenzy.
Although, if you adjust for size and examine the S&P 500 components equally, then the super expensive market actually looks pretty average at the underlying component level.
But the important question remains; is all this justified? It is hard to say no, when corporate earnings and profit margins also continue to make new highs. These companies are the greatest cash-flow engines in the history of human civilization.
Multiple expansion (when the price for a stock of index goes up without a corresponding increase in earnings) is definitely part of the story, but this bull market is being driven by earnings growth and resilient profit margins even in the face of policy induced whiplash.
Comparing the leaders of today’s market with the 90’s tech boom we will see that these companies have nearly twice the profit margins, twice the return on equity, and five times less debt. They are much more profitable and have much stronger balance sheets.
But that doesn’t mean everything is sunshine and rainbows. This market is narrow. Absent the AI firehose inundating the economy with cash, real GDP growth would have been zero or negative this year; aka recessionary.
There are other flashing yellow lights.
The S&P 500 and US Job openings typically have a close correlation. That relationship has decoupled in the last two years. Is that an early sign of productivity growth from AI implementation? Is this the sign of things to come, where corporations can do more with less people? Or is this a sign of underlying fundamental weakness in an economy being propped up by somewhat circular big-tech capital expenditure?
The trillion-pound elephant in the room is whether this massive buildout of data centers and AI infrastructure will yield return for the companies that are investing in it and for the economy at large. Thus far, the revenue brought in by these companies has been dwarfed by the investment.
And AI adoption rates among large organizations (250+ employees) had risen quickly through the first half of 2025, but some have since pulled back on those efforts.
It seems every day now a new parallel is made between today’s market and the last tech boom/bust cycle of the late 90’s. “They” talk about the enormous amounts of spending; then on fiber optic cables and now on data centers, or the seemingly blind allocation of capital; then to anything with a “.com” at the end and now anything with “AI” in the name, or they point to the circular cash flow relationships between providers and suppliers; then with Cisco and now with Nvidia.
And there are similarities, sure. It would be foolish to ignore them. But I see one major difference that is often left un-examined. Cross-asset comparisons can often be helpful. In this case, the steady march of gold and the positive correlation to growth equities is very different when compared with the late 90’s.
From the Netscape IPO in August 1995 to the end of 2000, Gold fell nearly 30% while the S&P 500 rose 156%.
This cycle, from the lows of October 2022 to October 2025 Gold has risen 102% while the S&P 500 is up 81%.
What does this potentially foreshadow? In my opinion, it may be signaling both an impending inflationary innovation boom and the realization that any major deterioration in the economy will be once again met with highly supportive and inflationary fiscal / monetary policies (clearly, I mean – they are already easing, and things are pretty much fine). Quantitative easing didn’t exist as a concept in 2000.
I think the bigger risk is that the Federal Reserve (and the President) are running the same playbook from the last time inflation was a persistent threat and will cut rates too far, too soon and be forced to hike them again when inflation and growth surprises to the upside.
But for now, let’s all look out the windows and enjoy the view.
With abundance,
Zachary S. Mineur CFA, CFP®
Chief Investment Officer
Independence Square Advisors
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