{"id":952,"date":"2025-06-14T16:48:00","date_gmt":"2025-06-14T16:48:00","guid":{"rendered":"https:\/\/retrotradingreport.com\/index.php\/2025\/06\/14\/sp-500-is-expensive-on-all-valuation-metrics-but-dont-sweat-it-strategist-says\/"},"modified":"2025-06-14T16:48:00","modified_gmt":"2025-06-14T16:48:00","slug":"sp-500-is-expensive-on-all-valuation-metrics-but-dont-sweat-it-strategist-says","status":"publish","type":"post","link":"https:\/\/retrotradingreport.com\/index.php\/2025\/06\/14\/sp-500-is-expensive-on-all-valuation-metrics-but-dont-sweat-it-strategist-says\/","title":{"rendered":"S&P 500 is expensive on all valuation metrics, but don\u2019t sweat it \u2013 strategist says"},"content":{"rendered":"
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US stocks have recovered significantly over the past two months from the initial plunge<\/a> catalyzed by the Trump administration\u2019s tariff policy. S&P 500 currently sits some 20% above its April low.<\/p>\n

However, following the recent rally, the benchmark index looks \u201cstatistically expensive relative to its own history on all 20 of the valuation metrics we track,\u201d says Savita Subramaniam \u2013 a Bank of America strategist.<\/p>\n

S&P 500 is currently trading at about 21 times its estimated earnings for 2025, which is about 35% above its historical average \u2013 she added in her latest report.<\/p>\n

Should investors be concerned about US stocks?<\/h2>\n

Despite stretched valuation, however, the equity and quant strategist is not particularly concerned. In fact, comparing today\u2019s benchmark index with its historical self may even be misleading, she argued in her research note.<\/p>\n

\u201cThis is apples-to-oranges comparison,\u201d Subramaniam noted, adding the composition of the S&P 500 has changed rather significantly over the past few decades.<\/p>\n

For example, asset-heavy industrial and manufacturing companies, which once dominated the said index (nearly 70% weightage in 1980), now represent less than 20% of it only.<\/p>\n

S&P 500 today is defined by leaner, tech-driven, service-oriented companies that boast stronger balance sheets, lower debt, higher profit margins, and more predictable earnings.<\/p>\n

In Subramaniam\u2019s view, these structural shifts justify a higher multiple than past generations of the index might have warranted.<\/p>\n

\u201cThe quality of earnings today is simply better,\u201d she added, citing the lower earnings volatility and stronger free cash flow generation among U.S. firms.<\/p>\n

Do US stocks really deserve a premium?<\/h2>\n

While some investors may balk at the current valuation, Bank of America made a strong case for the premium tied to the S&P 500 currently compared to other global markets in its research note.<\/p>\n

According to Savita Subramaniam, US stocks offer \u201cstatistically superior\u201d characteristics versus Asia or Europe, including double the projected long-term growth, higher free cash flow per share, and fewer non-earning companies.<\/p>\n

She also highlighted the U.S. market’s \u201cstructural advantages,\u201d including its energy independence, the dollar\u2019s role as the world\u2019s reserve currency, and \u201cunparalleled liquidity\u201d \u2013 all factors she\u2019s convinced support current valuation levels.<\/p>\n

Looking ahead, BofA\u2019s sector preferences lean toward communication services, utilities, and technology, which align with its view that quality, growth, and defensiveness will be rewarded in a maturing cycle.<\/p>\n

In short, while valuations may be flashing red by historical standards, the investment firm suggests the story is more nuanced, and that higher quality may warrant higher prices.<\/p>\n

Investors should note that Wall Street shops have been raising their year-end targets on the S&P 500 index in recent weeks \u2013 the latest one being Citi which now sees the benchmark index hittingthe 6,300 level in 2025, indicating potential upside of another 8% from current levels.<\/p>\n

The post S&P 500 is expensive on all valuation metrics, but don’t sweat it – strategist says<\/a> appeared first on Invezz<\/a><\/p>\n

<\/p>\n","protected":false},"excerpt":{"rendered":"

US stocks have recovered significantly over the past two months from the initial plunge catalyzed by the Trump administration\u2019s tariff policy. S&P 500 currently sits some 20% above its April low.However, following the recent rally, the benchmark index looks \u201cstatistically expensive relative to its own history on all 20 of the valuation metrics we track,\u201d…<\/p>\n","protected":false},"author":1,"featured_media":953,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[3],"tags":[],"class_list":["post-952","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-investing"],"_links":{"self":[{"href":"https:\/\/retrotradingreport.com\/index.php\/wp-json\/wp\/v2\/posts\/952","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/retrotradingreport.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/retrotradingreport.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/retrotradingreport.com\/index.php\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/retrotradingreport.com\/index.php\/wp-json\/wp\/v2\/comments?post=952"}],"version-history":[{"count":0,"href":"https:\/\/retrotradingreport.com\/index.php\/wp-json\/wp\/v2\/posts\/952\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/retrotradingreport.com\/index.php\/wp-json\/wp\/v2\/media\/953"}],"wp:attachment":[{"href":"https:\/\/retrotradingreport.com\/index.php\/wp-json\/wp\/v2\/media?parent=952"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/retrotradingreport.com\/index.php\/wp-json\/wp\/v2\/categories?post=952"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/retrotradingreport.com\/index.php\/wp-json\/wp\/v2\/tags?post=952"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}