The US stock market continues to fly high, with the S&P 500 and Nasdaq Composite indexes posting another set of weekly gains. However, some analysts are warning that the recent rally has made stocks unjustifiably expensive.
One key value indicator for the S&P 500, its price-to-book ratio, just surpassed a level it last reached in March 2000 – the eve of the dot-com boom collapsing. This has raised concerns among investors and analysts that tech giants may be overvalued.
Tesla’s share price is valued at nearly 200 times earnings, while Nvidia’s is around 60. Both are extremely pricey levels by historical measures. Torsten Slok, chief economist at Apollo Global Management, notes that “A.I. will have a significant impact on our lives and productivity,” but that doesn’t mean the tech companies in the S&P 500 are correctly priced.
On the other hand, some analysts argue that investors may be better placed to weather any downturn in equities prices. With safe-haven bonds gaining popularity, investors could take advantage of the market’s potential correction.
Earnings season has shown that large companies are holding up well under President Trump’s trade war, with profits surpassing analyst expectations. Corporate leaders haven’t mentioned recession fears much this quarter, suggesting that the market may be due for a correction.
However, global trade tensions and rising inflation still pose significant risks to the market. The Alaska summit between President Trump and President Putin of Russia has dominated headlines, with some experts warning that the talks could have big political and economic consequences for major American trading partners.
As the world waits for the outcome of these talks, investors will be keeping a close eye on central bank officials at Jackson Hole, where Jay Powell is expected to address the state of the economy. The Fed’s next move on interest rates will be crucial in determining the market’s direction.
In other news, Novo Nordisk shares surged after the FDA granted accelerated approval for its weight-loss drug Wegovy, and Soho House agreed to go private in a deal worth $2.7 billion. Corporate earnings and the Fed’s rate-setting meeting will be major focuses this week.
The speed of global trade is becoming increasingly uncertain, with some experts warning that the talks between Trump and Putin could have far-reaching consequences for American trading partners. As investors wait for clarity on these issues, they will need to keep a close eye on market trends and economic indicators to make informed decisions.
Source: https://www.nytimes.com/2025/08/18/business/dealbook/sp-500-market-valuations.html