American actions have recovered considerably in the past two months from the initial dive catalyzed by the Trump administration pricing policy. S&P 500 is currently at some 20% above its lower April.
However, after the recent rally, the reference index seems “statistically expensive compared to its own history on the 20 evaluation metrics that we follow,” explains Savita Subramaniam – a strategist from the Banque of America.
S&P 500 is currently negotiating at around 21 times its estimated benefits for 2025, around 35% above its historic average – it added in its last report.
Should investors are concerned with American actions?
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Despite an extensive assessment, however, the equity strategist and as a particularly concerned. In fact, the comparison of today’s reference index with its historic self can even be misleading, she argued in her research note.
“This is the comparison of orange apples,” noted Subramaniam, adding that the composition of the S&P 500 has changed quite considerably in recent decades.
For example, industrial and manufacturing companies that are heavy with assets, which once dominated said index (almost 70% weight in 1980), now represent less than 20%.
S&P 500 today is defined by thinner companies, technology -oriented and services that have stronger balance sheets, lower debt, higher beneficiary margins and more predictable profits.
In the opinion of Subramaniam, these structural changes justify a higher multiple than the past generations of the index could have justified.
“The quality of income today is simply better,” she added, citing the volatility of lower profits and the generation of available cash flows among American companies.
Do American actions really deserve a bonus?
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While some investors can relieve the current evaluation, Bank of America has pleaded for the premium linked to the S&P 500 currently compared to other global markets in its research note.
According to Savita Subramaniam, American actions offer “statistically superior” characteristics compared to Asia or Europe, including double the long -term growth, cash flow available higher by action and fewer companies that are not of reception.
It also underlined the “structural advantages” of the American market, in particular its energy independence, the role of the dollar as a global reserve currency and “unequaled liquidity” – all the factors it convinced supports the current evaluation levels.
For the future, the preferences of the Bofa sector are looking towards communication services, public services and technology, which align with its point of view according to which quality, growth and defensive will be rewarded in a maturation cycle.
In short, although the evaluations can flash in red compared to historical standards, the investment company suggests that history is more nuanced and that the best quality can justify higher prices.
Investors should note that Wall Street stores have increased their end -of -year objectives on the S&P 500 index in recent weeks – the last one being Citi which now sees the reference index reaching the level of 6300 in 2025, indicating an increase of an additional 8% compared to the current levels.
