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Remember when the S&P 500 plunged by almost 40% in the early days of the pandemic? Since the end of March the major market index has surged ahead by some 50%.

We’ve seen this kind of sustained price rise in the market before, haven’t we? Remember mania, when investors were willing to bet that a price-earnings multiple of 1,000 was sensible? Clearly, I think the current stock market is showing signs of froth.

I find bubbles among the most fascinating stories in finance, a legendary history that includes Tulipmania, the South Sea Bubble, the Mississippi Bubble, and the Roaring ’20s.

If the stock market is entering bubble territory, the timing of the bust remains deeply uncertain. That said, no one should be financially vulnerable when the inevitable sharp downturn happens.

In retrospect, there is the question about how could so many smart people be so dumb with their money? Yet the market’s recent performance reaffirms the insight that there are often good reasons behind the speculative bets. Certainly, that’s what the economic literature suggests.

Speculative fevers emerge during times of major innovations and technological change. The impact of economywide innovation is unpredictable. Take an essay by Rutgers University economics professor Eugene White in the 1990 book, “Crashes and Panics: The Lessons From History.”

“Surveying the bubbles from the 17th century to the present, the principal factor that leads to the emergence of a bubble is that the underlying fundamentals of the assets in question, be they stocks or tulips, cease to be well identified. This may be the result of some innovation, technological change or change in the structure of the economy. These developments make predictions of future earnings more difficult. …”

The pandemic is rapidly pushing forward the long-predicted digital economy. Telework has become standard. Telemedicine has been mostly promise — until now. Tesla’s stock market performance signals that the auto industry’s future is sustainable. Apple, Amazon and Microsoft together are now valued at a sum larger than the entire economy of Germany, notes investment adviser John Maudlin in his newsletter.

Investors are allocating their money toward the economy’s digitally based sectors. If history is any guide, many investors will lose when the bubble bursts. But the digital infrastructure that remains will be real.

Chris Farrell is senior economics contributor, “Marketplace” and Minnesota Public Radio.