Global Equity Valuations The market environment favors global ex-U.S., small-cap, and value stocks for their cheap valuations and growth potential, while U.S., large-cap, and growth stocks face valuation headwinds and higher downside risk. Image: Topdown Charts
Valuation – S&P 500 Index Forward P/E Ratio vs. MSCI World Ex-U.S. Forward P/E Ratio U.S. equities currently trade at roughly a 50% premium over international stocks, fueled by stronger earnings growth, greater profitability, and investors’ willingness to pay extra for these advantages. Image: Bloomberg
Valuation – 12-Month Forward P/E Ranges (MSCI Regions) The high valuation levels seen today in U.S. and global equity markets often suggest a risk of reduced future returns, unless earnings growth picks up enough to justify such prices. Image: Goldman Sachs Global Investment Research
U.S. Equity Index P/E Valuations vs. History The S&P 500’s forward P/E ratio is about 22x, higher than its historical average. While this indicates optimism, it also means the market is more vulnerable to earnings disappointments, increasing potential risks ahead. Image: Goldman Sachs Global Investment Research
S&P 500 Sector P/E Valuations Relative to History Valuation metrics indicate that certain S&P 500 sectors remain persistently overvalued compared to both their historical averages and other sectors. Image: Goldman Sachs Global Investment Research
Valuation – S&P 500 Forward Price-to-Earnings The S&P 500 is trading at 22 times expected earnings over the next year, 35% above its 20-year average. These elevated valuations are partly justified by expectations of strong forward earnings growth. Image: Bloomberg
S&P 500 Valuation Multiples Overvaluation in the S&P 500, especially among tech and AI stocks, is a legitimate concern in light of downward revisions to earnings estimates for 2025 and the high degree of index concentration. Image: Real Investment Advice
Developed Market Valuations While the macroeconomic outlook has weakened, the U.S. stock market’s forward P/E ratio has moved back toward pre-Liberation Day levels. Image: TS Lombard
Forward 10-Year Real Returns and CAPE Valuations While high CAPE ratios can persist in markets for years, history suggests these elevated valuations often precede eras of subdued stock returns. Image: Real Investment Advice
Valuation – S&P 500 NTM P/E Investors assign a higher earnings multiple to the S&P 500 market cap-weighted index than to the equal-weight index, reflecting a clear preference for the growth potential and market dominance of larger companies. Image: Goldman Sachs Global Investment Research
S&P 500 Valuation The S&P 500 remains significantly overvalued according to several long-term valuation metrics. Historically, such elevated valuations have often preceded periods of below-average long-term equity returns. Image: Bloomberg