# Wall Street's late-stage bubble warning

> Capital Economics sees one more good year for stocks, then a 21% drop as the AI trade runs out of cheap money.
- Title: Wall Street's late-stage bubble warning · Fortune | Shortify
- Summary: Capital Economics sees one more good year for stocks, then a 21% drop as the AI trade runs out of cheap money. The bubble signals analysts track are all…
- Keywords: stock market, ai bubble, treasury yields, valuations, forecasts, Wall, Street's, late-stage, bubble, warning, Fortune
- Source: Fortune — https://fortune.com/2026/09/13/stock-market-outlook-late-stage-bubble-crash-2027-treasury-yields-5-percent
- Author: Jason Ma
- Read time: 1 min
- Topics: stock market, ai bubble, treasury yields, valuations, forecasts
## Enjoy 2026 while it lasts
James Reilly of Capital Economics still sees the S&P 500 climbing to 8,250 by year end, up 7.7%. Then he expects a 21% slide to 6,500 by the end of 2027.

> On balance, we think the data look consistent with a late-stage bubble.
## Valuations look like 1999
The cyclically adjusted price-to-earnings ratio is near its dotcom peak. Stocks measured against Treasury bonds are also close to dotcom extremes.
## The earnings math breaks
Forward 12-month earnings growth for the S&P 500 matches the dotcom peak. Meanwhile the top AI hyperscalers' combined free cash flow is expected to go negative in 2027.
## Too few stocks, too many IPOs
Index gains are concentrated in a handful of names, a pattern that usually precedes trouble. A flood of IPOs and follow-on offerings has historically marked the end in months, not years.
## Five percent is the trigger
Rockefeller International's Ruchir Sharma says a 10-year yield decisively above 5% pops the AI bubble. It hit 4.97% on Friday.

> This breach would signal the start of a new era of tighter money, in which AI mega projects will be harder to fund.
## Even the bulls are flinching
Sharma notes US debt now tops 100% of GDP, so higher borrowing costs squeeze everyone. Ed Yardeni cut his bullish "Roaring 2020s" odds from 80% to 70%.

> Admittedly, recent developments in the oil and bond markets are unnerving.
## Key takeaway

The bubble signals analysts track are all flashing at once, and a 10-year Treasury yield decisively above 5% is the trigger to watch.