S&P 500 Valuation Bubble: P/E Ratio 35% Above Average Raises Concerns

[Coin World] The US stock market is rising against the trend in 2025, just a line away from its historical peak. However, the higher the S&P 500 index rises, the stronger the concerns about its valuation multiple bubble become. Data shows that the index has a price-to-earnings ratio of 22 times based on expected profits for the next 12 months, which is 35% higher than the long-term average. Among the 20 such valuation metrics tracked by Bank of America strategists, the index shows overvalued conditions on every metric. Senior Investment Strategist Kevin Gordon from a Financial Institution stated: "The current level of the market is sustainable, but we cannot have high confidence on the question of 'from here'. The optimistic expectations for earnings in the second half may be too high, coupled with multiples near cycle highs, which will require earnings to exceed expectations." In addition to earnings growth, strategists also indicated that significant rate cuts by The Federal Reserve (FED) would be another way to narrow the gap between the fundamentals and market prices of the index.