Bearish Blogger Admits Defeat After U.S. Stocks Rally 16%

A year ago, Nick Maggiulli, the author behind the Of Dollars and Data blog, argued that U.S. stocks looked frothy and that a pullback was likely. It was the second time since 2017 he had turned bearish. This week he published a post-mortem on the call, and the verdict is blunt: he was wrong. U.S. stocks returned about 16% over the period, dividends included.

His case rested on three signals that reminded him of the 2021 exuberance. Chamath Palihapitiya was filing for another SPAC. Meta was paying $250 million or more to land individual AI researchers. And the S&P 500's price-to-sales ratio was sitting near an all-time high.

On reflection, none of them held up. The SPAC filing says more about one promoter's incentives than about the market. Mark Zuckerberg has a record of overpaying for assets that later look like bargains, with Instagram at $1 billion the obvious example, so the AI hiring spree may prove the same. The valuation chart was the most damaging. The price-to-sales series he used, sourced from DQYDJ.com, was later revised. The 1999 peak that stood at 3.41 in his chart now reads about 2.09.

On the corrected data, the ratio crossed the 1999 level back in 2017, when nobody saw dot-com-style froth. It has since climbed to roughly 3.5 with no collapse. His takeaway is that the metric no longer signals what it once did, partly because today's companies run higher margins, which lifts aggregate price-to-sales even when valuations are reasonable. He had made a similar argument about the P/E ratio before.

The broader lesson, he says, is overfitting. If you search hard enough, any two periods can be made to look alike. The parallels with 2021 were real, but the speculative themes diverged. Much of the 2021 froth, such as NFTs and DeFi, fizzled. The 2025 theme, AI, appears to be delivering. He points to Anthropic, whose revenue run rate went from about $5 billion in July 2025 to an estimated $74 billion in late July 2026. He is careful to note that a private company's run rate says little about whether the S&P 500 is fairly priced. It does show why he misjudged the direction.

He also says he ignored the base rate. Historically, U.S. stocks have risen in about seven of every ten years, with an average gain near 9% in a given year. That held in bearish, bullish and in-between conditions.

In practice, the mistake was cheap. He kept his 401(k) at 80/20 instead of going fully into risk assets, and the miss cost about 4% on that account, which he calls a financial paper cut. He did not change the allocation afterward. With a growing family, he says it ended up being the right mix for him, even if he reached it for the wrong reason.

His closing point is one for any investor: build a portfolio that survives both overvalued and undervalued markets. Otherwise, he argues, you do not have a portfolio, you have a bet.