The S&P 500 is up roughly 19% over the past six months. The Nasdaq has gained about 26% over the same period. Both indexes hit record highs this week.
Those numbers look good on paper. The mood behind them is a different story. Price gains that outrun earnings attract a certain kind of buyer. History has a record of how that ends.
Warren Buffett has a name for what he is watching. He compared the current market to a church with a casino attached, and he was not flattering the casino side.
Also read: Warren Buffett doubles down on stock market message for 2026
What Buffett said and what he meant by the casino
Buffett made the remark during a CNBC interview at Berkshire Hathaway’s annual meeting. The church, in his analogy, represents long-term investors buying businesses based on what they are actually worth. The casino is the other side, where rising prices, rather than the value underneath, drive the buying.
“We’ve never had people in a more gambling mood than now,” Buffett told CNBC.
He added that this does not mean “investing is terrible,” but that “prices for an awful lot of things will look very silly.” That is a warning from someone who has watched markets for more than seven decades.
The number that shows how expensive stocks really are
One figure puts the current market in context. The S&P 500 Shiller CAPE ratio has been above 40 since May 2026. The ratio measures the index’s price against its average inflation-adjusted earnings over the prior 10 years. A higher number means investors are paying more per dollar of earnings.
The long-term average sits at approximately 17. The ratio hit a record 44 in late 1999, shortly before the dot-com bubble burst in March 2000. The current reading does not guarantee a crash. It does mean that stocks are priced at levels that have historically left very little room for disappointment.
Buffett has repeated this warning throughout 2026. Berkshire Hathaway has also been sitting on cash rather than putting it to work. That is its own signal.
The 1990s already showed where this tends to go
The dot-com era is the closest modern comparison. Hundreds of technology companies saw their shares climb through the 1990s on enthusiasm alone. Many collapsed when the bubble burst in early 2000, and the worst performers were companies with weak balance sheets, unsustainable models, and little behind the stock price besides a rising chart.
The companies that held up were the ones with real earnings, manageable debt, and competitive advantages that were hard to copy. A rising stock price made a lot of businesses look successful. It did not keep them alive when sentiment turned.
