Just been looking at some market data that's honestly pretty wild. We're seeing bond and stock market signals that honestly haven't shown up together since before the last stock market crash back in 2000. And I think a lot of people aren't really paying attention to what this means.

Let's start with the bond market. Back in late January, the spread between investment-grade corporate bonds and U.S. Treasuries tightened to just 71 basis points. That's the tightest we've seen since 1998, right before the dot-com implosion. For context, that means investors are only getting 0.71% extra yield to take on corporate credit risk instead of basically risk-free government debt. Think about that for a second. Companies are getting treated almost like they're as safe as the U.S. government. Either people are extremely confident these companies won't default, or they're being way too complacent. And history suggests it's probably the latter.

Then you look at the stock market valuation, and it gets more interesting. The CAPE ratio (cyclically adjusted price-to-earnings) just hit 40.1 in January. That's a level we haven't seen since September 2000 when the last stock market crash was unfolding. To put it differently, in the entire history of this metric going back to 1957, the market has only been this expensive about 22 times out of 829 months. Less than 3% of the time, basically.

Here's what concerns me though. When CAPE ratios have been above 40 historically, the returns that follow have been rough. The data shows that from these valuations, the S&P 500 averaged a 3% decline over the next year, 19% over two years, and 30% over three years. In the worst-case scenarios we've seen, drawdowns hit 43% over both two and three-year periods. Even the best outcomes showed basically flat or negative returns over three years.

Now, could AI change the math? Maybe. If profit margins expand enough because of AI productivity, earnings could grow fast enough to justify current valuations. But that's speculative. What we know right now is that you're in a high-risk, low-reward setup. There's barely any room for credit spreads to tighten further, but tons of room for them to blow out if the economy weakens. Same with stocks—valuations are stretched, so downside risk is real.

My take: If you're holding stocks you'd panic-sell in a 20-30% drawdown, now's the time to trim them. And be selective about new positions. This isn't the last stock market crash we'll ever see, but the setup right now suggests we're closer to one than most people want to admit. The risk-reward just isn't there anymore.