The current market forward P/E ratio has reached 22x, approaching the high point of 2021 and even nearing the 24x historical record during the internet bubble period in 2000. Compared to the average of 18.6x over the past 10 years, it is now 23% higher, fully entering the realm of "severe overestimation" from a statistical perspective.

What is even more concerning is that the P/E ratio of the market-cap-weighted index and the equal-weighted index differ by a factor of 5 (22x vs. 17x). What does this imply? A few large-cap leading stocks are artificially boosting the overall market valuation. If these companies' performance falls short of expectations, the entire market could face a chain reaction of declines. This concentration issue, in simple terms, is like putting all eggs in a few baskets.

Institutions forecast the total return in 2026 to be around 12%, significantly lower than the levels of the past two years. In a high-valuation environment, growth potential is already compressed. Analysts also point out that although stable interest rates and earnings growth may continue to support this valuation, the "safety cushion" has already been worn thin. Investors at this stage need to be more careful in selecting individual stocks based on their fundamentals and not be blinded by high valuations. History shows that when the P/E ratio is at its peak, the market tends to overreact to any negative news, and volatility may exceed expectations.