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Wild Weather Ahead: Summer 2024 Could Be a Scorcher After Hottest Year on Record

The climate crisis is causing more severe heatwaves and related events. Here’s what to know about dealing with extreme weather in 2024.

We just lived through the hottest year since recordkeeping began more than a century ago, but before too long, 2023 might not stand out as the pinnacle of extreme heat. 

That’s because it’s unlikely to be the only hottest year that we experience. Our climate is changing, growing warmer due to the emissions from burning fossil fuels, and our weather is changing with it. It’s possible that this year may turn out to be hotter still.

In March, scientists from the EU’s Copernicus Climate Change Service said February 2024 was the hottest February according to records that stretch back to 1940. The news came on the heels of their report in early January that, as expected, 2023 was indeed the hottest year on record. Temperatures closed in on the critical 1.5-degree Celsius rise above preindustrial levels, after which we will see irreversible damage to the planet. These aren’t freak outliers: The extreme heat we’re experiencing is something we’ll need to be prepared to deal with on a much more regular basis, along with storms, floods and drought.

Later in March, the US National Oceanic and Atmospheric Administration issued its spring outlook, predicting that most of the continental US and Alaska will see above-average temperatures from April through June. The risk of flooding, it said, will ease during the three-month period because of “historically low winter snow cover” in large parts of the country. 

In April, a forecast from the Weather Company also predicted an “abnormally hot” summer in parts of the US. NOAA published a map this month showing where it expects the heat to be most extreme compared to normal. It highlighted a band stretching from the north west down through the south west and into Texas. The combination of heat and little rain could increase the risk of drought and wildfires in some regions. 

A key trend highlighted by the US government’s Fifth National Climate Assessment, published in November, was that climate change is provoking extreme weather events across the country that are both more frequent and more severe. It pointed to an increase in heatwaves and wildfires in the West over the past few decades, the increased drought risk in the Southwest over the past century and more extreme rainfall east of the Rockies. Hurricanes have also been intensifying, as those who have found themselves in the path of a storm know all too well.

You’ll need to be prepared. Extreme weather is going to have a widespread impact on industry, society and individuals. Last year in the US there were 25 extreme weather events with losses amounting to over $1 billion that resulted in the deaths of 464 people. People lost their homes, saw personal property damaged or suffered mental and physical health issues.

Three months into 2024, we’re staring down the barrel of another potentially record-setting hot year. If there’s a silver lining, it’s that the US is now better prepared than ever, and we know what steps you can take to better deal with these unwelcome events. When it comes to weather, forewarned is forearmed. 

The US has been taking active steps. The Biden administration has provided funding to build resilient communities, and a new (as of September 2023) National Climate Resilience Framework, which should provide the US with a whole range of protections. These include conserving water resources, modernizing and strengthening the electric grid against weather and disasters and building infrastructure to protect communities and ecosystems from sea level rise, tidal flooding, hurricanes and storm surges.

At home and in your community, you can take steps, too, including preparing your home for wildfires and flooding and recognizing signs of heat-related health issues. This way, when wild weather comes calling, its impact on our homes, health and livelihoods is minimized.

Forecast 2024

Last year’s heat was no anomaly. It’s part of a long-term trend: The last 10 years have been the 10 warmest on record, according to NASA, with most of the Earth’s warming taking place over the last 40 years. Most forecasters are anticipating yet another year of extreme heat ahead.

“If we look at the forecast for the next three months in the long range, it’s suggesting that the trend that we’re seeing in baseline warming could continue, and so 2024 could rival 2023 for being the hottest year on record, which is very scary,” says Chloe Brimicombe, a heatwave researcher at the University of Graz.

Some of the extreme weather we experienced in the latter half of last year and will continue to experience in the first half of this year is a result of El Niño, a cyclical climate event that sees unusually warm ocean waters that has a knock-on effect of warmer temperatures and increased rainfall across the southern part of the US. For instance, temperatures in Death Valley, California, peaked at 128 degrees Fahrenheit in July, while forecasters predicted warmer temperatures in northern parts of the US stretching into February and a colder, wetter winter for Southern states.

People wading through NYC flood water, which reaches above their knees

While meteorologists are able to make long-term predictions about El Niño, other climate-related predictions are trickier. “All things told, we’re going to see an increased prevalence of heat events across the globe, but we can’t tell right now exactly where that will be,” says Andy Hoell, a climate scientist at NOAA.

What we do know, he adds, is that the climate crisis can compound events such as extreme heat or extreme rainfall to make them more likely or more severe. 

In the past, it wasn’t always easy to draw direct links between extreme weather events and climate change. But huge improvements in attribution science (the ability to specifically identify emissions as the cause for unusually dramatic weather) in recent years have changed the game. The World Weather Attribution program, based at Imperial College London, has now completed nine studies on droughts, heatwaves, wildfires and heavy rainfall in North America. “Every study found that climate change made the event more intense and more likely,” says Ben Clarke, a researcher at WWA.

The speed at which climate scientists are able to identify human-caused climate change as the culprit for extreme weather has also dramatically improved. Last year alone, Climate Central was able to attribute record-breaking spring heat in the western US, and ongoing extreme heat stretching through the summer in Texas and Florida, to climate change as it was happening. “It’s much more impactful as far as our understanding of what climate change really is if we can make that connection in real time,” says Andrew Pershing, vice president of science at Climate Central, a climate science analysis non-profit.

Thanks to attribution science, we can confidently point to a heatwave we’ve experienced and say whether climate change played a role in making it happen. But it also helps us to recognize that extreme weather events we’re experiencing are part of a pattern – one that can’t be broken without tackling the root causes of the climate crisis. “Until the world moves away from fossil fuels and reduces emissions to net zero,” says Clarke, “extreme weather events in North America will continue to become more intense, more dangerous and more deadly.”

Even if you live in a region that hasn’t yet directly been impacted by a climate-linked weather event, you’re not off the hook.

“As the climate continues to warm, most areas will be at an increased risk of some types of climate-linked extreme weather,” says Russell Vose, chief of the Monitoring and Assessment Branch at NOAA’ National Centers for Environmental Information and one of the NCA’s authors. “Perhaps the best example is extreme heat – it can occur anywhere.”

He points to the scorching heat dome that descended on the Pacific Northwest in June and July 2021, which was unprecedented in the historical record. The unpredictable nature of such extreme heat means no regions are marked as safe.

In fact, a region that’s been lucky enough to not yet experience an extreme heat event is more likely to experience one in the future and suffer more greatly due to lack of preparedness, according to a study published by scientists from Bristol University last April.

Scientists are more concerned about the ability of people in areas that don’t usually get intensely hot to cope when their turn comes. “What worries me would be something in the Upper Midwest or the Northeast that just hasn’t had a major heat event for a few years,” says Pershing. “I think we kind of lose a little bit of that muscle memory.”

Weather’s unequal impacts

The weather might not discriminate when it comes to who gets hit, but that doesn’t mean its impacts are experienced equally by all groups across American society.

“Certain groups are simply more vulnerable to extreme events due to geographic, socioeconomic or demographic factors,” says Vose. He points to the extreme rainfall brought by Hurricane Harvey in 2017, which led to a large number of homes being flooded in Harris County, Texas, with a disproportionate impact on low-income Hispanic neighborhoods.

When a heatwave hits, it will feel hotter in high-density urban environments that are more likely to be occupied by people of color or people living in poverty than in more spread-out neighborhoods or rural areas. Then some are homeless and can’t access health care. They have little ability to protect themselves, no matter how much warning they get about an incoming heatwave. This makes these groups much more vulnerable to the health risks of extreme heat.

Heat researchers are extremely concerned about people who live in housing not resistant to warm temperatures, says Brimicombe, who points out that those who rent are especially at risk. “If you’re a tenant, you have less ability to adapt your house to extreme heat than if you’re a homeowner,” she says. “And that also means young families, because babies are vulnerable to extreme heat.”

Not only are economically disadvantaged communities in the US more susceptible to feeling the worst impacts of extreme weather, but they have also done the least to contribute towards the climate crisis in the first place. A study published last August revealed that the wealthiest households in the US are historically responsible for 40% of the country’s climate emissions.

Meanwhile, these same households have more tools at their disposal to protect themselves from the impact of climate-related weather events. In 2019, The New York Times reported that wealthy California residents were banding together to hire private firefighters to protect them from the impacts of wildfires.

The Biden administration is well aware that marginalized and minority groups are hardest hit by climate change, including extreme weather. At the beginning of his term, the president set up the White House Environmental Justice Advisory Council, made up of leading experts from the US climate justice community.

Last September the group published its policy recommendations urging the government to ensure climate disasters do not further or exacerbate harm to vulnerable populations and communities. 

Aerial shot of houses surrounded by flood water.

“Disaster relief should never be the cause of deepening inequality in any neighborhood, region, or Tribal community,” the council wrote in its recommendations. “When disaster hits, the goal of government should be that the people hit the hardest should emerge stronger and more secure than before, not the opposite.”

It recommended a number of measures that would help protect people in case of extreme weather including the creation of a low-cost national flood insurance and the establishment of a “Just Relocation Fund” that would provide communities hit by climate impacts with a relocation process based on a dignity framework with respect for their human rights. 

The White House has yet to respond to the recommendations, but if it does act on them this would hopefully prevent a repeat of the aftermath of Hurricane Katrina in 2005, in which Black communities were allocated less money to rebuild their housing, resulting in a lawsuit against the federal government.

Through the Bipartisan Infrastructure Law and other initiatives, the Biden administration is investing heavily in adaptation, mitigation and resilience measures designed to protect all Americans from the impacts of climate-linked extreme weather. As with all funding, people may have to wait some time to feel the full impact of that funding. In the meantime, there are a number of steps you can take to keep yourself safe in the months ahead.

How to weather the weather, whatever the weather

Summer’s not so far off, meaning sizzling days are on the horizon. 

Intense heat poses some scary risks to our health, including heat cramps, heat exhaustion and heat stroke, which can be life-threatening. It’s important to familiarize yourself with the signs so that you’ll recognize them in yourself and others, and can therefore seek medical attention if necessary.

Remember that heat is more likely to adversely affect older people, children and babies, and those with preexisting health conditions. There may be cooling centers or other well-air-conditioned places in your community where you can take refuge – if you do, consider taking elderly or vulnerable neighbors with you. “Look out for friends and families,” said Brimicombe. “Don’t be complacent.”

The British writer and fellwalker Alfred Wainwright is widely credited as coining the phrase, “there’s no such thing as bad weather, only unsuitable clothing.” Wainwright, who died in 1991, didn’t live through the kind of consistently bad weather we’re experiencing in this era of extreme heat, but that doesn’t mean we have nothing to learn from him. In the midst of a heatwave, it’s best to wear loose-fitting clothes in light colors, rather than black, which absorbs the heat.

Make sure you stay hydrated and try to spend as little time as possible outside in the sun. Try to block sunlight from warming your house, and consider buying reflectors to place in your windows that can help keep the heat out. At nighttime, take note of when it might be cooler outside than in, and use this to your advantage by opening doors and windows to let the internal temperature of your house regulate. Fans can be effective, but at very high temperatures they’re likely to just start pushing the hot air around – in which case you should, sparingly and without putting too much pressure on the grid, resort to air conditioning, or moving to your local cooling center.

People sleeping on the floor at a cooling center in Portland, Oregon

Remember that global warming is worldwide, so the same heat warnings apply even if you plan to travel to other parts of the world over the summer. The heat waves that hit the US in the summer of 2023 also impacted areas of Europe, including popular vacation spots in the Mediterranean. Countries including Greece, Spain and Italy were all affected by wildfires that resulted in the evacuation of locals and tourists alike from some areas and islands.

The surge in Europe-bound American tourists that occurred in 2023 is expected to continue this year, but if you’re planning to be among them it’s important not to travel without comprehensive insurance. Likewise, if you’re traveling in the peak months of July and August, be prepared to adjust your itinerary in case of extreme heat to ensure you’re not putting your health at risk. This may mean spending more time indoors than you’d planned for the sake of your health.

For other types of extreme weather that may hit your property such as wildfires, storms or floods, it may be useful to have an evacuation plan. You should prepare an emergency evacuation bag, also known as a go bag or a bug-out bag. Don’t forget to plan for your pets. The National Fire Protection Association has a handy guide on how to prepare your home for wildfires. 

One of the easiest but most important things you can do is keep an eye on long- and short-term weather forecasts. The silver lining for people in the US, says Pershing, is that the country has great weather forecasting capabilities and the channels to communicate incoming events to people so you can prepare. “The gaps are really whether you take it seriously yourself,” he says.

So for anyone who does take it seriously, be sure to read our tips on how to prepare yourself and your home for wildfires, hurricanes, floods and storms.

Here are some additional resources:

For even more details on natural disasters and how to prepare beforehand or respond after an event takes place, check out https://www.ready.gov/.

Correction, March 15: This story originally misstated the name of the National Fire Protection Association.

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Technologies

U.S. diesel price tops $6 per gallon, a record high as Ukraine and Iran wars ripple through economy

U.S. diesel prices hit their highest level ever as fuel supply disruption stemming from the Ukraine and Iran wars lifts transportation costs.

U.S. diesel prices hit $6 per gallon on Friday for the first time ever, as fuel supply disruptions triggered by the Ukraine and Iran wars raises transportation costs across the entire economy.

Truckers and farmers are paying about 63% more to fill up their semis and tractors than they did at this time last year, according to data from AAA. The average price nationwide is now about $6.06 per gallon.

Prices are even higher in California, the biggest agriculture state in the U.S., at $7.98 per gallon.

Fuel costs are rising as crude oil prices have surged in response to a sharp escalation in fighting between the U.S. and Iran this month. U.S. crude oil futures topped $100 per barrel on Thursday for the first time since May. The contract has gained about 20% in September.

Diesel is the real lifeblood of the economy even though consumers tend to pay more attention to retail gasoline prices, said Bob McNally, president of Rapidan Energy, in an interview with CNBC’s “The Exchange” on Tuesday.

Higher diesel prices are passed down to consumers in what they pay for food, consumer goods and energy. Diesel fuels the trucks, trains and ships that bring goods to market. It powers the machinery that farmers use to plant and harvest food. And it heats homes and generates electricity in some cases.

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“It’s the more insidious, more costly, and more impactful fuel,” McNally said. “As we climb higher, it is a real concern.”

Diesel prices at these levels will be a “silent killer” for the economy, said Patrick De Haan, head of petroleum analysis at GasBuddy, in an interview with CNBC’s “Power Lunch” Tuesday.

Gasoline prices, meanwhile, have never been this high this late in the year, De Haan said. Prices at the pump hit a Labor Day record of $4.15 per gallon earlier this week. Americans are spending about $700 million more per day on gas and diesel than they did a year ago, the analyst said.

“There’s sticker shock there for consumers,” De Haan said.

Fuel costs are rising as the Iran and Ukraine wars have disrupted global supplies. Kyiv has pounded Russian refineries, forcing Moscow to ban diesel exports. Iran and its militant Houthi allies in Yemen have also hit the refineries of U.S. Gulf allies. Fuel exports through the Strait of Hormuz are constrained due to the Iranian attacks on tankers.

The wars in Eastern Europe and the Middle East have shut down refineries with about 5 million barrels per day of capacity, said Valero Chief Operating Officer Gary Simmons on the U.S. refiner’s July 30 earnings call.

The world has lost nearly 8% of its diesel supply with little spare refining capacity available to make up the shortfall, said Andy Lipow, president of Lipow Oil Associates, in a Wednesday note.

Rising diesel prices pose an “enormous challenge” for the Trump administration, said Helima Croft, head of global commodity strategy at RBC Capital Markets, in a Sept. 4 interview with CNBC’s “Power Lunch.”

“U.S. refineries are running at 98% utilization rates — there is just no spare capacity,” Croft said.

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Technologies

Buffett’s confidence in troubled decade-old acquisition finally pays off

Warren Buffett has said he paid too much for Precision Castparts in 2016. Now its complex metal castings are in high demand.

(This is the Warren Buffett Watch newsletter, news and analysis on all things Warren Buffett and Berkshire Hathaway. You can sign up here to receive it every Friday evening in your inbox.)

Buffett’s confidence in troubled decade-old acquisition finally pays off

Six years ago, when Berkshire Hathaway took an $11 billion write-down of its $37.2 billion 2016 acquisition of Precision Castparts, Warren Buffett wrote in his annual letter to shareholders he had paid “too much” for the company, which makes “complex metal components and products.”

While it was a “fine company – the best in its business,” he had been “simply too optimistic” about its profit potential, a “miscalculation … laid bare” by the enormous downturn for the aerospace industry, Precision Castparts’ largest customers, amid the Covid pandemic.

In a CNBC interview when the deal was first announced, Buffett admitted it was “a very high multiple for us to pay,” but told shareholders at the 2016 meeting he had great confidence in Mark Donegan, the company’s CEO, both then and now, and the company’s long-term profit outlook.

It’s taken longer than he planned, but Buffett’s purchase is now looking pretty good.

As Reuters puts it, there is currently a shortage of the “complex” products Precision Castparts makes that are essential for engine turbine blades.

They’re also used in natural gas turbines, which are in demand to produce energy for artificial intelligence data centers.

This week, GE Aerospace announced it would pay $11.75 billion to acquire Consolidated Precision Products, one of the few companies that competes against Precision Castparts.

Barron’s calls that “pricey” at 26 times projected 2027 earnings before interest, taxes, depreciation, and amortization.

Using the same multiple, Barron’s estimates Precision Castparts is worth around $100 billion. That’s well above the potential value of $60 billion to $75 billion it cited in an article last month that said the unit “probably has become one of the more valuable divisions” of Berkshire.

It’s also nearly three times the 2016 purchase price.

In the Barron’s piece, Andrew Bary said Berkshire, and its share price, aren’t “getting much credit” for the subsidiary’s rising value, in part because CEO Greg Abel, like Buffett, doesn’t do analyst conference calls or investor events that could draw attention to the unit’s performance.

His recommendation: “Without Warren Buffett at the helm, Berkshire may have to start telling its story if it wants to attract a new generation of investors. This year’s trading action suggests that something may need to change.”

Berkshire bounces a bit as Wall Street sells off

Berkshire Hathaway shares managed a modest gain this week even as Wall Street’s major averages declined, a small departure from the 2026 “trading action” Bary cites.

Both the Class A and Class B shares gained almost 0.9% while the S&P 500 fell by 0.8%.

Until Friday’s bounce, that benchmark index, along with the Dow Industrials and the Nasdaq Composite, had dropped four days in a row as oil and bond yields moved higher.

Even with this week’s outperformance, Berkshire’s B shares still trail the S&P 500 by more than 10 percentage points so far this year.

Nebraska candidate moves to replace ad that included Buffett’s image

The campaign team for the Republican running in Nebraska’s 2nd Congressional District accelerated the deployment of a new campaign ad after Susie Buffett complained about a previous commercial that briefly included an image of her father, Warren Buffett.

In the ad, a picture of Buffett and his name appear on screen for roughly two seconds as candidate Brinker Harding says, “Here in Omaha, we know a thing or two about the stock market, some more than others. But we do it without insider information.”

He then goes on to highlight his call for a ban on Congressional stock trading, saying some lawmakers “trade on secrets you’ll never know,” as they “get rich” while “we barely get by.”

In a report that led its 10 PM CT newscast Wednesday evening, ABC affiliate KETV in Omaha reported Susie Buffett had asked Harding on Sept. 2 to remove the ad.

She told the station, “I think it’s worth it to say that Warren did not give Brinker his permission to use his face or name in his ad.

“It implies that my dad endorses him. He did not have permission to use it.”

The KETV report quoted Harding as saying in a statement, “In Nebraska, we work hard and support each other, and we do it honestly. Warren Buffett exemplifies that, and that was the point of my ad.”

The report said Harding did not comment on whether the ad would be taken down but noted “it does look like new ads from his campaign are beginning to run on some stations.”

A Harding campaign spokesperson told me the campaign did not think its ad implied a Buffett endorsement, but to be respectful to the Buffett family, it responded to her concern by accelerating the rollout of its next planned ad by several days, although its effort was hampered by the Labor Day weekend.

The commercial now running does not show or mention Buffett.

BUFFETT & BERKSHIRE AROUND THE INTERNET

Some links may require a subscription:

– Best’s News and Research Service: 2026 Best’s Rankings: Berkshire Hathaway Takes DPW Top Spot Among Accident & Health Lines

– Financial Times: The day Warren Buffett saved Salomon Brothers

HIGHLIGHTS FROM CNBC’S BUFFETT ARCHIVE

The effects of 9/11 on Berkshire and the insurance industry (2002)

Warren Buffett shares his thoughts on the 9/11 attacks and explains how Berkshire’s insurance companies have started taking terrorism into account when writing policies.

AUDIENCE MEMBER: I know you lost a lot of money as a result of 9/11. But I would like to know how 9/11 changed your life and your investment strategy?

WARREN BUFFETT: It made everybody, I think, in the country aware, I mean, we’ve gone through world wars and all of that, and essentially felt quite protected within these borders.

And I have been quite worried about — Charlie can attest to — you know, the possibility, particularly of some kind of nuclear device in this country, by — probably more likely by terrorists than by some, at least, declared act of war by another state.

And 9/11 made everybody realize that as humans have not progressed, particularly, in terms of how they behave with each other over the years, they have progressed enormously in their ability to inflict damage on those they hate for one reason or another…

In terms of the business aspects of it, in your question, obviously the area at Berkshire that it effects most significantly, by miles, is insurance.

And prior to 9/11, even though we recognized that there could be huge monetary damages that flowed from the activities of what I would call deranged people, we hadn’t really written the contracts in such a way as to either get paid for taking that risk or to exclude the risk. In other words, we were throwing it in for nothing.

We had excluded risk for war. I mean, we knew that we’d seen what had happened in England in the 40s, and so we had taken account of something that some of us had seen with our own eyes, but we didn’t take account of something that we knew was possible, but we just hadn’t seen. And that’s, you know, that’s the human condition, to some degree.

Since September 11th, everybody in the insurance business recognizes that they had exposures that they weren’t charging for, and they either had to exclude those exposures or they had to charge for them.

We have written — first thing we had to do, of course, is we had lots of policies on the books that left us exposed to this, and most of those policies ran for a year, starting at different points. Those have run off to a great degree, but they’re not entirely run off.

The other thing we did was on new policies. We have sold a fair amount, quite a large amount, of terrorism insurance that excludes what we call NCB, nuclear, chemical, and biological, as well as fire following nuclear.

And, we can take a fair amount of exposure to that sort of terrorism, because it doesn’t — it won’t aggregate. It aggregated at the Twin Towers in a way that — World Trade Center — in a way that just about was as extreme as you could get for non-NCB-type activities.

I mean, that was a huge amount of damage done without nuclear, chemical, or biological.

But we can have tens of billions of dollars with NCB excluded throughout a greater New York area, or something, but we can’t have hundreds of billions of exposure that would be exposed, say, to, nuclear activities, because there an act or two, or three, coordinated, could cause damage that would destroy the insurance industry.

And if we had coverage on that, it would destroy us as well.

BERKSHIRE STOCK WATCH

Four weeks

Twelve months

BRK.A stock price: $766,000.00

BRK.B stock price: $510.37

BRK.B P/E (TTM): 12.83

Berkshire Cash as of June 30: $365.5 billion (Down 8.0% from March 31)

Excluding Rail Cash and Subtracting T-Bills Payable: $359.2 billion (Down 3.8% from March 31)

Berkshire repurchased $4.5 billion of its shares in Q2 2026.

BERKSHIRE’S TOP EQUITY HOLDINGS – Sep. 11, 2026

Berkshire’s top holdings of disclosed publicly traded stocks in the U.S. and Japan, by market value, based on the latest closing prices.

Holdings are as of June 30, 2026, as reported in Berkshire Hathaway’s 13F filing on August 14, 2026, except for:

– Mitsubishi, which is as of April 30, 2026

The full list of holdings and current market values is available from CNBC.com’s Berkshire Hathaway Portfolio Tracker.

QUESTIONS OR COMMENTS

Please send any questions or comments about the newsletter to me at alex.crippen@cnbc.com. (Sorry, but we don’t forward questions or comments to Buffett himself.)

If you aren’t already subscribed to this newsletter, you can sign up here.

Also, Buffett’s annual letters to shareholders are highly recommended reading. There are collected here on Berkshire’s website.

— Alex Crippen, Editor, Warren Buffett Watch

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Technologies

Wall Street firm warns AI stock rally may be nearing its end: key reasons

Capital Economics says that while the S&P 500 may keep rising this year, the AI‑driven rally shows multiple bubble indicators and is expected to peak within months, with a projected decline to 6,500 by late 2027.

Various signs of a market bubble indicate that although the S&P 500’s rally can continue this year, its medium‑term outlook appears weak because the market has become overly frothy, according to Capital Economics.

James Reilly, senior market economist at Capital Economics, noted on Thursday that most indicators point to the AI equity rally being close to its end.

Since mid‑2023, Capital has been more optimistic than most about the stock market, viewing AI as a transformative technology.

The firm’s year‑end 2026 S&P 500 forecast has consistently exceeded consensus estimates.

Nevertheless, Capital maintains that the AI‑driven rally is a bubble destined to burst.

To identify a late‑stage bubble, Reilly examines eight metrics: valuations, earnings, index concentration, equity issuance, and foreign interest in U.S. stocks.

Several of these metrics are already at or near levels seen before past market peaks.

While earnings expectations appear aligned with a market top, measures such as volatility and leverage are somewhat less concerning.

Earnings are the most significant warning sign.

S&P 500 earnings growth expectations are hovering at levels only seen at the dot‑com bubble peak, and long‑term EPS forecasts have reached a record high.

Reilly argues that the tech sector’s heavy concentration of this growth means any weakness in tech earnings will heavily drag on the index.

Additional warning signals are also emerging.

Index concentration is approaching dot‑com era extremes, net equity issuance has turned positive, and foreign ownership of U.S. stocks is at a record level.

Reilly warns that another wave of IPOs and share sales could be especially significant, as past issuance booms have historically coincided with market peaks.

He adds that, based on history, the bubble’s end is likely just months away, not years.

Leverage measures are not yet alarming compared with other factors, though the analyst cautions they are moving in a concerning direction.

Volatility indicators resemble those of a mid‑stage bubble, but constituent‑level volatility is not as extreme as at the dot‑com bust’s end.

Reilly expects the S&P 500 to rise from roughly 7,650 now to about 8,250 by the end of 2026, but ultimately projects a decline to 6,500 by the end of 2027.

These projections imply an 8% gain this year and a 21% drop in 2027.

Most signs point to the AI equity rally being close to its conclusion, Capital Economics senior market economist James Reilly stated on Thursday in a note.

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