Investors All in US Stocks? Is It Safe to Invest at "Dangerous" High Levels?
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~
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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
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~
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 🍀🍀🍀
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。
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。
Be disciplined, do your RSPs and tap on power of compounding factor through DCA. And all these movements doesn't matter.