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

Tiger_comments
20:39
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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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Comments

  • Shyon
    20:54
    Shyon
    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

    • 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
  • Barcode
    21:39
    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 🍀🍀🍀

  • TimothyX
    20:57
    TimothyX
    投資者因選擇風險較高的股票而不是更安全的債券而獲得的額外回報正在減少。結果，與債券相比，股票的吸引力可能較小。

    Savita Subramanian，策略師美國銀行，告誡市場情緒和定位“危險的看漲，”向這些級別的投資者發出潛在風險的信號。

  • Cadi Poon
    20:57
    Cadi Poon
    投資者似乎都在美股。

    根據EPFR數據，美股ETF和共同基金吸引了截至上週三的一週流入近560億美元，創下第二大單週流入從2008年開始。

    這些資金連續7個月持續流入，爲2021年以來最長連續流入。

  • MasterStonker
    20:53
    MasterStonker
    $MicroStrategy(MSTR)$ Yes it's safe at nearly 99% 🚀🚀🚀🚀🚀🔥🔥🔥🔥🔥🌙🌙🌙🌙🌙
  • Nopri1988
    43 minutes ago
    Nopri1988
    Great article, would you like to share it?
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