Investors All in US Stocks? Is It Safe to Invest at "Dangerous" High Levels?

Tiger_comments
11-19
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Investors seem to be all in US stocks.

According to EPFR data, US stock ETFs and mutual funds attracted nearly $56 billion in the week ending last Wednesday, marking the second-largest weekly inflow since 2008.

These funds have experienced continuous inflows for seven consecutive months, the longest streak since 2021.

1. Big Banks Raise S&P 500 Target to 6,500 Points


With $.SPX(.SPX)$ recently surpassing the 6,000 point, major institutions have expressed optimism about the U.S. stock market's outlook for next year:

  • Morgan Stanley: Set a base-case year-end 2025 target for the S&P 500 at 6,350 points, with a bullish scenario target of 7,400 points.

  • Goldman Sachs: Raised its year-end 2025 S&P 500 target from 6,300 to 6,500 points, around 10% higher than current levels.

  • Yardeni Research: Predicted that the S&P 500 could reach 7,000 points by the end of next year, potentially driven by economic policies under a new Trump administration.

2. US Stock Market Faces Questions Over High Valuations and Zero Risk Premium

The S&P 500's price-to-earnings (P/E) ratio is at 22x, above its five-year average of 20x.

Some analysts argue that high valuations suggest that returns from investing in the S&P 500 over the next decade may be significantly lower than the past decade.

The gap between the S&P 500's earnings yield (how much profit investors earn from owning stocks) and the 10-year Treasury yield (what you earn from safe government bonds) has almost disappeared. This is the smallest gap since 2002.

The extra reward investors get for choosing riskier stocks over safer bonds is shrinking. As a result, stocks might look less attractive compared to bonds.

Savita Subramanian, a strategist at Bank of America, cautioned that market sentiment and positioning are "dangerously bullish," signaling potential risks for investors at these levels.

How do you view?

Will you still invest in US stocks despite of high valuations and low risk premium?

Can $.SPX(.SPX)$ hit 6500 as analysts suggest?

Leave your comments and also post to win tiger coins~

S&P Target 6500? Is It Safe to Invest at High Levels?
With $.SPX(.SPX)$ recently surpassing the 6,000 point, major institutions have expressed optimism about the U.S. stock market's outlook for next year: Morgan Stanley: Set a base-case year-end 2025 target for the S&P 500 at 6,350 points, with a bullish scenario target of 7,400 points. ---------- Will you still invest in US stocks despite of high valuations and low risk premium? Can $.SPX(.SPX)$ hit 6500 as analysts suggest?
Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.
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  • Shyon
    11-19
    Shyon
    Win 30 Tiger-coins
    I believe the U.S. stock market, particularly the S&P 500 $S&P 500(.SPX)$ , is likely to hit the 6,500 target over time. Strong corporate earnings and ongoing economic recovery provide a solid foundation for growth. Institutions like Goldman Sachs and Morgan Stanley are optimistic, and their confidence, along with steady inflows into U.S. stock funds, supports this outlook.

    Even with high valuations and a shrinking risk premium, I don’t think the market will correct sharply. Liquidity from low interest rates makes stocks more attractive than bonds. While short-term fluctuations are possible, I believe the S&P 500 could reach 6,500 in the next few years, driven by continued growth and investor optimism.

    Despite the risks of high valuations, I think the long-term outlook for U.S. equities remains strong. Would you agree that the bullish sentiment could drive the market higher?

    I on board with $SPDR S&P 500 ETF Trust(SPY)$ !

    @Tiger_comments @TigerStars @TigerGPT

    • ShyonReplyicycrystal: 
      [Cool] [Cool] [Cool]
    • icycrystalReplyShyon: 
      [Like] [ShakeHands]
    • TigerGPT: 

      I apologize for the inconvenience, but it seems that the information provided for the stock analysis does not correspond to the S&P 500 index ($SPX). The analysis provided is for two different stocks, SPIRAX-SARCO ENGINEERING PLC and Spenda Ltd.

      However, to address your question about the bullish sentiment driving the market higher, it is important to consider various factors and perspectives. While strong corporate earnings and continued economic recovery are positive drivers for the market, high valuations and a shrinking risk premium could pose risks.

      It is essential to note that market sentiment can change based on economic conditions, geopolitical factors, and investor sentiment. Therefore, it is always recommended to conduct thorough research and consider the potential risks before making investment decisions.

      Regarding the S&P 500 reaching 6,500, it would be speculative to provide a definitive answer without proper analysis and forecasting. Analyst suggestions and forecasts should be carefully considered but not solely relied upon. It is crucial to review a variety of sources and consult with a qualified financial advisor to make informed investment decisions.

      Remember, investing in the stock market carries inherent risks, and past performance is not indicative of future results. It is important to assess your risk tolerance and investment objectives before investing.

    • Shyon: 
      Come and join ya @GoodLife99 @Fenger1188 @icycrystal @b1uesky @Universe宇宙 @Barcode @nomadic_m @koolgal @rL
  • icycrystal
    11-20
    icycrystal
    nothing is for sure and nothing is safe... better not all in and go slow and steady...

    gap between the S&P 500's earnings yield (how much profit investors earn from owning stocks) and the 10-year Treasury yield (what you earn from safe government bonds) has almost disappeared. This is the smallest gap since 2002.

    The extra reward investors get for choosing riskier stocks over safer bonds is shrinking. As a result, stocks might look less attractive compared to bonds.

    @LMSunshine @rL @Universe宇宙 @GoodLife99 @HelenJanet @koolgal @Shyon @Aqa @SPACE ROCKET @TigerGPT

    How do you view?

    Will you still invest in US stocks despite of high valuations and low risk premium?

    Can $.SPX(.SPX)$ hit 6500 as analysts suggest?

    Leave your comments and also post to win tiger coins~

    • TigerGPT: 

      Based on the news articles I found, here are some viewpoints regarding US stocks, valuations, and risk premium:

      US Stock Market Mixed, Walmart Up 3.64%, Trump Media Down 10.33%: On November 19, 2024, the US stock market opened with mixed results. The S&P 500 Index dropped by 0.53%. This indicates that there is some volatility in the market.

        

      U.S. Stocks Open Lower on Tuesday; Super Micro Soars 26%: US stocks opened lower on Tuesday as investors fled to safety amid rising geopolitical tensions between Ukraine and Russia. The Dow Jones Industrial Average shed 327 points, or 0.7%. Investors moved into safe-haven assets, driving yields lower.

        

      COLUMN-Risk assets may be entering 'danger zone': Some analysts believe that US stocks and credit markets are becoming expensive and entering a "danger zone." The gap between the earnings yield of the S&P 500 and the 10-year Treasury yield has almost disappeared, indicating potential risks for investors.

        

      Investors All in US Stocks? Is It Safe to Invest at "Dangerous" High Levels?: This article discusses the potential risks of investing in US stocks at high levels. Some analysts argue that market sentiment and positioning are "dangerously bullish," which may signal potential risks for investors at current levels.

        

      Market Euphoria Bounces Back: The article highlights that stock markets have experienced significant growth since hitting a two-year low in October. However, it also warns of overpricing and concentration in US stocks relative to the rest of the world, suggesting caution in the current market environment.

        

      Regarding the price target of the S&P 500 reaching 6500, I couldn't find any specific articles or analysts' opinions supporting or discussing this target. It's important to note that price targets and analysts' suggestions can vary, and it's essential to conduct thorough research and consider multiple viewpoints before making investment decisions.

      As an AI analyst, I do not provide investment advice. However, I can recommend that you carefully assess the current market conditions, valuations, and risk premium before making investment decisions. It is always prudent to have a diversified portfolio and consider the long-term prospects of the investments.

      Please note that the information provided is for reference purposes only and does not constitute investment advice. Investing in stocks involves risks, including the potential loss of principal. It is important to conduct your own research and consult with a qualified financial advisor before making any investment decisions.

  • Aqa
    11-20
    Aqa
    With $.SPX(.SPX)$ recently surpassing the 6,000 point, major institutions raise S&P 500 target to 6,500 Points and all the way to 7,400 points. Many people still invest in US stocks despite of high valuations and low risk premium. Hope .SPX. continues to go up and hit 6500 points. Thanks @Tiger_comments @icycrystal
  • Kiwi Tigress
    11-20
    Kiwi Tigress
    //@Barcode:

    I'm continuing to invest in a range of stocks, esp small cap with the January effect in place. A lot of stocks are breaking out! 

    Goldman Sachs now expects the S&P 500 to reach 6,500 by the end of next year up from its previous target of 6,300! 

    Happy trading ahead! Cheers BC 🍀🍀🍀

  • Tui Jude
    11-20
    Tui Jude
    //@Barcode:

    I'm continuing to invest in a range of stocks, esp small cap with the January effect in place. A lot of stocks are breaking out! 

    Goldman Sachs now expects the S&P 500 to reach 6,500 by the end of next year up from its previous target of 6,300! 

    Happy trading ahead! Cheers BC 🍀🍀🍀

  • Cool Cat Winston
    11-20
    Cool Cat Winston
    //@Barcode:

    I'm continuing to invest in a range of stocks, esp small cap with the January effect in place. A lot of stocks are breaking out! 

    Goldman Sachs now expects the S&P 500 to reach 6,500 by the end of next year up from its previous target of 6,300! 

    Happy trading ahead! Cheers BC 🍀🍀🍀

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