2025 marked the third consecutive year of double-digit gains for the S&P 500 (SPX). While many investors are celebrating, Bank of America strategist Savita Subramanian has cautioned that the index is trading at stretched valuations.
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“No way to sugar coat it: the S&P 500 is expensive,” wrote Subramanian in a note, adding that it has “never been more expensive” in terms of market-cap-to-GDP, price-to-book-value, price-to-operating cash flow, and enterprise-value-to-sales.
S&P 500 Valuation is High with Sector-Specific Opportunities
Of the 20 metrics that Subramanian tracks, 18 are signaling rich valuations for the index. She expects the S&P 500 to finish 2026 at 7,100, implying upside of just 3.7%, and believes that a slowing labor market is a key risk.
However, Subramanian still sees value in certain sectors, including healthcare and real estate. She cites the sectors’ positive analyst revisions compared to the rest of the market and outperformance during the past three months.
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