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