狮山巡礼
投资杂谈
Key Points
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U.S. stocks are near record highs, and valuations are the highest since the dot-com era, increasing market risk.
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Goldman Sachs notes earnings growth drove over half the SP 500s 14% gain this year and raised the index target.
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Analysts see strong forward earnings, but inflation, jobs data, and bond yields could challenge rate-cut expectations.
U.S. stocks are trading at new heights. Theyre also asking investors to pay the most for future earnings in more than two decades, adding a new element of risk to the markets rally.
TheSP 500
is now up more than 30% from its early April lows, with 28 record highs under its belt since the start of the year, thanks in part to better-than-expected corporate earnings, a resilient domestic economy, andoptimism for the Federal Reserve to cut rates.
Those gains have come with a price: Stock valuations are now at their highest levels since the dot-com era, according to the CAPE ratio method developed by Nobel Prize-winning economist Robert Shiller.
On a standard metricthe SP 500 price against the earnings expected from companies in the index over the next 12 monthsstocks are similarly expensive. The current price-to-earnings ratio of around 23 times is matched only by a brief period in the post-Covid bull market and the tech bubble of the late 1990s.
The stock markets strength is making it tougher to put new money to work, said Rick Gardner, chief investment officer at RGA Investments. The focus for the remainder of 2025 will be more about what will drive markets in 2026, he added, citing earnings growth and the Feds easing cycle as potential catalysts.
David Kostin, chief U.S. equity strategist at Goldman Sachs, wrote in a note published late Friday that stock valuations have largely expanded this year in advance of expected rate cuts, the first of which came at last weeks FOMC meeting.
However, he said earnings growth has been a much more powerful driver of the rally, generating just over half of the SP 500s 14% gain since the start of the year. That is likely to continue.
Earnings should remain the primary driver of equity upside going forward, Kostin and his team wrote in a report that lifted their end-of-year SP 500 price target by 200 points, taking it to 6,800. On a 12-month view, Kostin sees the benchmark at around 7,200 points, an 8% advance from current levels. The SP 500 closed Friday at 6,664.36.
Equity valuations are elevated relative to history but appear close to fair value based on the underlying macroeconomic and corporate fundamental backdrop, Kostin said. An accommodative Fed and an economy that accelerates into 2026 should allow the market to maintain its current multiple.
Ed Yardeni, president and chief investment strategist of Yardeni Research, sees forward earnings forecasts for the next 12 months at the highest levels on record at around $295 a share. LSEG estimates it rising to around $305 a share in 2026.
Those outlooks will be tested over the next few weeks. Inflation and jobs data will challenge the markets assumption for more rate cuts, and the third-quarter earnings season kicks off in early October.
Earnings can only grow if the economy remains healthy andweakness in the job marketdoesnt accelerate into a spike in headline unemployment.
Anearly signal of those concerns could come from the bond market, where a rally in10-year Treasury note yields
may suggest a more pessimistic view for U.S. growth.
In that case, the downside risk to earnings would outweigh the benefit of falling interest rates for stocks, Kostin at Goldman Sachs said. Still, his overall outlook remains bullish, particularly given the Feds dovish pivot.
During the past 40 years, the SP 500 has generated a 15% median 12-month return when the Fed resumed cutting rates against a backdrop of continued economic growth, Kostin said.
