The S&P 500 may well deserve its elevated valuation, but that doesn’t mean there aren’t pockets of madness in the market right now.

The stratospheric valuations afforded to the electric vehicle sector and to various meme stocks are the most well-known cases, although these are not isolated examples. Leuthold Group data shows that since 2020, the number of S&P 500 stocks trading on at least 10 times sales has skyrocketed to 73 – way above the previous record (40) set during the 1999-2000 dotcom bubble.

Not only that, Kailash Capital noted in September that the total market capitalisation of companies trading on at least 20 – yes, 20 – times sales was $4.9 trillion (€4.3 trillion), way above the previous peak of $3.6 trillion (€3.2 trillion) in 2000. One can assume it has increased further since then.

Remarkably, a portfolio of stocks trading on over 20 times sales would have outperformed over the last two years, notes Ritholtz Wealth Management's Nick Maggiulli. However, that's not normal. You are, as Kailash Capital noted, "likely to get shot to pieces in such investments over time."

That’s echoed by Maggiulli, who warns: “This will not last”.