Market Analysis: S&P 500 needs big earnings growth or Fed rate cut to justify highs

Planet Daily News: U.S. stocks are bucking the trend in 2025, just a hair's breadth away from historical highs. However, as the S&P 500 index rises, concerns about its valuation multiple bubble grow stronger. Data shows that the index's price-to-earnings ratio based on expected profits for the next 12 months is 22 times, 35% higher than the long-term average. Among the 20 valuation indicators tracked by Bank of America strategists, the index shows overvaluation on every metric. Kevin Gordon, senior investment strategist at Charles Schwab, stated: "The current market level is sustainable, but we cannot have high confidence about 'starting from here'. Optimistic earnings expectations for the second half may be too high, and with multiples approaching cyclical peaks, earnings must exceed expectations." In addition to earnings growth, strategists also suggest that a significant Fed rate cut could be another way to narrow the gap between fundamentals and market prices. (Jinshi)