The last time gains in stocks outpaced profit expansion by this much was in 1999, when equity valuations surged 19 percent in a year to 30 times reported profit, according to data compiled by Bloomberg. That bull market ended the following year, with the S&P 500 tumbling 49 percent from March 2000 through October 2002 as the dot-com bubble burst.

In 1987, prices rose so fast, valuations increased 43 percent through August, about twice the pace of the year before. That month marked the peak in a five-year rally, followed by a 34 percent loss through December 1987.

U.S. equities have been whipsawed since May, when Fed Chairman Ben S. Bernanke first indicated that the central bank may start to reduce its quantitative easing bond buying this year. The S&P 500 fell 5.8 percent from a high on May 21 through June 24 and rallied 8.7 percent through Aug. 2, before declining 2.7 percent.

Corporate earnings need to accelerate to justify the surge in equities as the central bank begins to scale back its unprecedented monetary stimulus, according to Joost van Leenders of BNP Paribas Investment Partners in Amsterdam.

‘Negative Outlooks’

“There’s been a lot of hope and expectations that things will improve in the second half,” Van Leenders, who helps oversee $660 billion as a strategist at BNP Paribas, said by phone on Aug. 22. “The improvement in earnings growth has been delayed from the third quarter to the fourth quarter. Not many companies are giving forward guidance, and those that are, are giving negative outlooks.”

While U.S. stocks may be in the final leg of a bull market, that’s often the stage with the biggest gains as bears capitulate, according to Laszlo Birinyi, president of Birinyi Associates Inc. In this last phase, which Birinyi calls exuberance, equity markets have surged 39 percent on average.

Birinyi, one of the first money managers to advise clients to buy in 2009, wrote in a Aug. 7 report that the rally in U.S. equities was poised to slow after the 17 percent surge this year. He predicted that the S&P 500 may climb to a new high of 1,740 by December, 4.6 percent above the current level. The S&P 500 exceeded Birinyi’s forecast of 1,600 in May.

Previous Peaks

Even as the S&P 500 valuation expanded this year, it remains below the level at which previous rallies peaked. The average multiple during bull runs since 1957 has been 17.4 times reported profits, about 10 percent higher than today’s ratio, data compiled by Bloomberg show. Advances ended at 20.2 times earnings on average, 26 percent higher than the present level.