The Motley Fool advises investors to stop fixating on potential market crashes and instead focus on the long-term growth of corporate earnings. The publication argues that historical data suggests current valuation concerns and economic risks are poor indicators of when a crash will occur, but useful for setting long-term return expectations.
Current market conditions present several traditional warning signs. The Shiller cyclically adjusted price-to-earnings ratio, which compares stock prices to 10-year inflation-adjusted earnings, and the Buffett indicator, which measures stock prices against GDP, both indicate that the S&P 500 is historically expensive. Leadership in the market has become concentrated in megacap technology stocks. Inflation remains well above 3%, and long-term Treasury yields are at multidecade highs. Additionally, market breadth has weakened beneath the surface of major indexes.
Despite these factors, The Motley Fool contends that decades of stock market history show these elements are not reliable predictors of a crash. The S&P 500 has maintained a track record of producing long-term returns even through significant disruptions, including the 1970s stagflation crisis, the 1987 Black Monday crash, the tech bubble collapse, the 2008 financial crisis, the COVID-19 bear market, and the 2022 inflation shock. The index has also weathered periodic environments characterized by high valuations and rising interest rates.
The primary driver of this long-term upward trend has been corporate earnings growth. In 1985, S&P 500 earnings per share stood at $44.63. By 2025, index earnings have risen to $247.96, representing an increase of more than 450%. While investing at higher valuation levels historically leads to lower forward-looking long-term returns, and a Treasury yield above 5% makes bonds more competitive relative to stocks, these metrics shape return expectations rather than pinpointing specific crash dates.
The Motley Fool recommends that investors consider broad market exchange-traded funds as long-term holdings regardless of short-term valuation levels or economic signals. The Vanguard S&P 500 ETF is cited as one of the best ways to invest in U.S. large-cap stocks. For those seeking exposure to the entire investable U.S. stock market, the Vanguard Total Stock Market ETF is presented as an alternative. As long as corporate earnings continue to grow, the publication asserts that the S&P 500 remains on a long-term path higher, with current volatility characterized as short-term noise.