🤔Market is Expensive? A Glance of MAG 7 ’s P/E Ratio in 5 yrs

In a public speech in the early morning of September 24, 2025, Powell bluntly stated, "By many metrics, stock prices are quite high."

This wasn't his first time warning about valuations, but it was the first time he used the term "quite high" after both $Dow Jones(.DJI)$ and $NASDAQ 100(NDX)$ hit new all-time highs, instantly sending the question of "are US stocks expensive?" to the forefront of online search.

The market also voted with its feet—the Nasdaq fell nearly 1% on the day of his speech, while AI leaders $NVIDIA(NVDA)$ and $Oracle(ORCL)$ both fell over 2%.

1. Are They Expensive? Putting Today’s Data into a Historical Frame

Indicator	23 Sep 2025	20-yr Average	Mar-2020 (Covid Low)	Mar-2000 (Dot-com Peak)
$S&P 500(.SPX)$ forward P/E	≈ 30×	17–18×	15×	30×
$NASDAQ 100(NDX)$ P/E	≈ 33×	22×	19×	35×
U.S. equity risk premium (1 / P/E – 10-yr Treasury)	≈ 0.7 % (3.3 % – 2.6 %)	2.5 %	6.6 % (Treasury ≈ 0 %)	negative
Buffett Indicator (market cap / GDP)	≈ 195 %	120 %	140 %	158 %

Valuation: the $S&P 500(.SPX)$ has re-entered dot-com-peak territory.
Risk premium: the earnings yield on stocks beats the 10-year Treasury by only 70 bp—the slimmest cushion since 2002.
Buffett Indicator: sitting far above its historical band, flagging headwinds for long-term returns

2. Why does Powell say “expensive,” yet add “not extreme”?

Low rates are the biggest shield
The $BS US TR BND 7-10YR CCY ETF(US10.AU)$ sits around 2.6 %, well below the 4 % long-term average. Powell stresses that valuations must be judged against the risk-free rate: if rates stay below their historical norm, equity multiples deserve to reset higher. In 2020 he already noted: “On P/E alone the market looks rich, but the equity premium is not in extreme territory.”

Earnings are still growing
$S&P 500(.SPX)$ EPS rose 11 % y/y in Q2 2025, and AI-related cap-ex is keeping tech earnings growth above 20 %. The market is “dear” but not “absurd”—for now. Should profit forecasts be cut, a 30× P/E would quickly become a naked swim.

Sentiment and fund flows
Post-rate-cut, retail money and levered ETFs have poured in; FOMO has replaced fear, amplifying short-term swings. Powell’s verbal tap on the brake is meant to cool temperatures, not to declare crisis.