The S&P 500 Is Doing Something Unseen in More Than 100 Years -- Here's What History Says Happens Next
Written by Adam Levy for The Motley Fool -> S&P 500 valuations are extremely high by almost any measure. It's important to put that valuation in the context of future expectations. Bond investors can provide another signal to where the stock market is going from here. The S&P
It's important to put that valuation in the context of future expectations.
Bond investors can provide another signal to where the stock market is going from here.
The S&P 500 (SNPINDEX: ^GSPC) has experienced one of the strongest bull markets in history during the past few years. The index produced total returns of 26%, 25%, and 18% in 2023, 2024, and 2025, respectively, and it's posted another 7.8% gain year to date (as of June 12). And that rally follows a strong performance ever since the market bottomed in March 2009.
But as the benchmark index sits near its recent all-time high, investors may be growing increasingly concerned about valuation. For example, the S&P 500's Shiller price-to-earnings (P/E) ratio currently sits at more than 41, a level it hasn't seen outside of the dot-com bubble. Meanwhile, the price-to-book and price-to-sales ratios of the index are sitting at all-time highs.
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Warren Buffett 's favorite valuation measure is comparing the market capitalization of the stock market to gross domestic product (GDP). The S&P 500's market cap currently is double the trailing-12-month GDP, the highest level since 1929. And if you adjust that ratio for prevailing Treasury bond yields, the S&P 500 is trading at its highest premium in more than 100 years, dating back to 1920, according to CME Group data.
Although that might concern some investors, a couple of key factors in today's market should provide some comfort.
Despite high stock valuations, there are some encouraging market trends that could suggest the bull market can continue for several more years, according to CME analysts led by Erik Norland.
