A recent surge in institutional investor sentiment has lifted the US stock market, with the S&P 500 index edging closer to its record high. According to DataTrek Research co-founder Nicholas Colas, “Big Money” investors are now embracing the rally, which suggests a potential for further gains. The S&P 500 closed at 6,000.36 on Friday, just 2.3% below its record closing high. Colas notes that institutional investors’ risk appetites have increased, verging on levels consistent with a near-term top. This could lead to a “melt-up” scenario, where investors sharply accelerate the market’s climb in an unsustainable way.
The S&P 500 trades at 22.7x consensus 2025 earnings estimates, and Colas believes that multiples will increase further. Consensus earnings estimates for the S&P 500 typically decline through a year unless the US economy is coming out of a recession. However, with the current economic environment, the S&P will only get more “expensive” as the year goes on.
A strong rebound in May after tariff worries rocked the market has brought the US stock-market index back into positive territory for 2025, despite ongoing trade-policy uncertainty. Institutional investors were risk-wary until recently and have now caught up with the global equity rally, which is now two months old.
Source: https://www.marketwatch.com/story/big-money-turns-bullish-on-stocks-will-that-lead-the-s-p-500-to-a-melt-up-8086159d