Despite the recent easing of trade tensions, investors remain skeptical about the persistently record-high valuations of the US stock market. According to Chris Iggo of AXA Investment Managers, the current S&P 500 multiples, which exceed 20 times earnings, appear particularly risky.
As noted by Reuters, slowing economic growth, the threat of higher tariffs, and the reconsideration of the US role in international organizations pose significant challenges to sustaining high market valuations. Meanwhile, the American stock market capitalization, which has reached twice the size of the country's GDP, is well above historical norms.
According to Chris Iggo's estimates, the current valuation of US stocks remains 40% higher than their European counterparts and over 60% above emerging market benchmarks. This situation is particularly sensitive in the lead-up to crucial summer decisions on US tariff policy and the federal debt ceiling.
The Federal Reserve projects that inflation risks stemming from tariff hikes are expected to emerge as early as June. This could significantly impact investor sentiment in the coming months, Reuters concludes.