After racking up a staggering 85% return over the past three years, the S&P 500 is riding a wave of momentum—but its valuation levels now echo the dot-com era, raising questions about whether long-term returns could once again disappoint.

As of today, the S&P 500 Index, as tracked by the Vanguard S&P 500 ETF (NYSE:VOO), is trading at a forward price-to-earnings ratio of approximately 23—meaning investors are paying 23 times expected earnings over the next 12 months.

Valuations at these levels were last seen in 2000, and the decade that followed delivered weak returns—although the 2008-2009 financial crisis had a profound impact on them.

Is there really a strong link between stock market valuations and future returns? Do high valuations always lead to lower returns down the road—and vice versa?

Can Today's S&P 500 Price Tell You Tomorrow's Return?

Historically, there's a clear trend: when the S&P 500 has traded at elevated forward price-to-earnings ratios, long-term returns have often disappointed.

Periods with forward P/E ratios above 22—roughly where the index sits today—have historically produced 10-year annualized returns between -3% and 3%.

Notably, no instance of valuations above a forward P/E of 24 has ever led to a decade of positive returns.

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