26 June 2025 | S&P 500

S&P 500 multiples are well above analysts' fair estimates — Bloomberg

S&P 500 multiples are well above analysts' fair estimates — Bloomberg

Despite the many obstacles the US stock market has encountered this year on its way to growth, American stocks are now on track to hit new record highs.

However, as Bloomberg notes, there are growing concerns among analysts that S&P 500 multiples are beginning to appear excessively high. According to the agency, the index is trading at 22 times expected profits in the next 12 months. That's 35% above the long-term average.

And while valuations are not the most effective tool for gauging market conditions, according to Bloomberg, current measures look extremely excessive.

As shown by the Bloomberg Intelligence model, which takes into account Treasury yields, earnings per share, and risk premium, a fair price-to-earnings multiple for the S&P 500 should be near 17.7. The figure is now at 23.7. To get back to a realistic level, a 30% growth in corporate earnings over the next year at once is needed.

According to Kevin Gordon, senior investment strategist at Charles Schwab & Co, while current market levels are sustainable, there are no guarantees of further growth.

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