Bank of America strategists argue that while US equities look extremely expensive by almost every traditional valuation measure, those lofty multiples may be justified given the quality of today’s S&P 500.
Bloomberg carry the report. In summary:
Out of 20 valuation gauges tracked by the bank, 19 show rich levels and four are at record highs. Still, strategist Savita Subramanian highlights that the index now carries less leverage, steadier earnings, greater efficiency and stronger margins than in past decades.
This view contrasts with analysts warning of a dot-com–style bubble, instead suggesting investors should consider today’s higher multiples as the “new normal.” The S&P 500 has climbed more than 30% since early April, without suffering a 2% pullback in 108 sessions — the longest such stretch since 2024. Its forward P/E ratio has hit 22.9, exceeded only twice this century: during the dot-com bubble and the pandemic rally.
Fed Chair Powell acknowledged equity valuations look elevated, and BofA itself notes the index has never been more expensive relative to GDP or many P/E metrics. Even so, Subramanian argues that a combination of Fed rate cuts, fiscal stimulus, and broadening profits could deliver a boom in sales and earnings that validates current valuations. She views this upside scenario as a more likely outcome in 2026 than stagflation or recession.
