As prices surged and earnings increased at a slower rate than analysts anticipated, smaller companies have become more expensive than they’ve been 86 percent of the time since 1995, according to data compiled by Bloomberg. The Russell 2000 is trading for 49 times reported earnings, compared with a multiple of 39 in March 2000. The S&P 500 has a price-earnings ratio of 17.2, close to its average since 1937, data compiled by Bloomberg and S&P show.

The Russell 2000 slumped 43 percent between March 2000 and October 2002, about 6 percentage points less than the S&P 500.

LogMeIn, which offers remote computer connectivity to mobile professionals, and Athenahealth, a Watertown, Mass.-based provider of online services to doctors and hospitals, are among nine companies with a P/E ratio above 1,000.

‘Hard Place’

“It’s a hard place to find a lot of bargains right now,” Donald Yacktman, founder of Austin, Texas-based Yacktman Asset Management, which oversees $30 billion, said in an interview on March 19. “It doesn’t surprise me that this market, particularly small-caps, could be pretty highly valued and way out of whack.”

Central bankers must preserve the option of using interest rates to contain financial bubbles even as they strengthen supervisory tools to curtail systemic risk, the Fed’s Tarullo said on Feb. 25 at a conference of the National Association for Business Economics in Arlington, Va.

“Valuations do appear stretched” for some small technology firms, Tarullo said. “Monetary policy action cannot be taken off the table as a response to the build-up of broad and sustained systemic risk.”

Narrative Change

Fed Chair Yellen said last week that the central bank’s stimulus program could end this fall and benchmark interest rates may rise about six months later. The Fed had previously said it wouldn’t raise rates for a considerable period, without specifying a time frame.

“The change in the narrative is partially to remove that speculative excess,” David Lafferty, the chief market strategist for Natixis Global Asset Management in Boston, said in a March 20 phone interview. His firm oversees about $867 billion. “When you combine the higher valuations in the small- cap world with less accommodative Fed policy, you have the potential for great volatility.”