The S&P 500 has surged 28% this year, driven by multiple expansion and P/E ratios nearing dot-com bubble levels. However, experts warn that AI-related accounting quirks are inflating earnings, making current profits unsustainable for the majority of companies.
Big Tech is benefiting from these inflated earnings, while AI startups are struggling to turn a profit. Small and mid-cap stocks, on the other hand, have historically offered better long-term value during periods of large-cap overvaluation.
Analysts predict that the S&P 500 will reach its fair value at around $3,859, suggesting a potential 37% drop in 2025. This raises questions about the sustainability of the current market trend and whether investors should be looking elsewhere for opportunities. With mega-cap stocks dominating the index, experts believe that far better prospects exist outside this space.
Source: https://seekingalpha.com/article/4742369-where-will-sp-500-be-at-2025-end-prediction