To The Moon

Recently, the S&P 500 has maintained strength near its highs, but analyzing from multiple dimensions such as valuation, fund flows, and insider trading reveals that the internal market is not experiencing consistent expansion. The current US stock market is closer to a phase where 'index resilience remains strong, but structural divergence continues to deepen': At the index level, it is still supported by leading heavyweight stocks and capital inflow, but absolute stock-bond valuations are weak, sector valuations are diverging, insider trading signals and the internal strength disparities among the M7 all suggest that the constraints of operating at high levels have not disappeared. This article will systematically review the structural characteristics and potential constraints of current US equities from five dimensions: absolute stock-bond valuation, relative sector valuation, fund flows, insider trading, and the M7.

I. Absolute Stock-Bond Valuations Show US Equity Pressure Unresolved

From the perspective of absolute stock-bond valuation, the overall S&P 500 is still in an expensive range, and its performance characteristics over the past year do not support the conclusion that valuation pressures have significantly eased. Measured by the S&P 500 earnings yield minus the 10-year US Treasury yield, this spread has consistently been in negative territory over the past year, indicating that the static return compensation provided by equity assets remains below the risk-free interest rate. This means that the current US stock market's ability to maintain high levels relies more on market expectations for earnings growth, premiums for leading companies, and liquidity conditions, rather than being built on the traditional basis of "stocks are cheaper than bonds." Currently, investors are actually holding the S&P 500 with lower risk compensation, so once earnings expectations weaken or long-term interest rates remain high, valuation constraints will become more apparent.

$SPDR S&P 500 ETF Trust(SPY)$ $S&P 500(.SPX)$ $E-mini S&P 500 - main 2606(ESmain)$ $E-mini Nasdaq 100 - main 2606(NQmain)$ $NASDAQ 100(NDX)$ $NASDAQ(.IXIC)$ $Invesco QQQ(QQQ)$ $E-mini Dow Jones - main 2606(YMmain)$ $Micro E-mini Dow Jones - main 2606(MYMmain)$ $Dow Jones(.DJI)$ $SPDR Dow Jones Industrial Average ETF Trust(DIA)$ $10-YR T-NOTE - main 2606(ZNmain)$

Looking at changes in the latest week, on May 4, the 10-year Treasury yield rose to 4.45%, and the spread widened simultaneously to near the low of the sample period, reflecting that when risk-free interest rates rise, the valuation attractiveness of US stocks relative to bonds will further weaken. On May 5, as the Treasury yield slightly retreated from 4.45% to 4.42%, the spread also recovered from -1.00% to -0.97%, but overall it remains significantly low, indicating that valuation-side constraints have not substantially eased. Against this backdrop, for the S&P 500 to continue operating at high levels, it still requires stable earnings expectations, liquidity conditions that do not significantly tighten, and risk appetite remaining at high levels to provide joint support.

II. Divergent Sector Relative Valuations Highlight Contradictions, Structural Overvaluation Persists

If the stock-bond spread answers whether "the US stock market is broadly cheap," then sector valuation divergence further reveals that current high valuations are not evenly distributed but carry distinct structural characteristics.

According to World Pe Ratio data and statistical methods, as of May 5, the S&P 500 index P/E ratio was 27.61x, indicating it is "Overvalued" over a 5-year horizon, and "Expensive" over both 10-year and 20-year horizons, showing that current index valuations are already at historically high mid-to-long-term levels. Breaking it down by sector, Information Technology, Industrials, Materials, Consumer Staples, Consumer Discretionary, Utilities, and Energy are generally in the Overvalued or Expensive ranges. Among them, the IT sector's P/E ratio is 36.95x, and Industrials is 29.49x, both at high levels, reflecting that current market pricing is not concentrated on a single theme but shows a certain breadth of valuation expansion.

At the same time, technical signals show that the Energy sector's trend deviation from its 200-day moving average reached +22.07%, IT was +17.15%, Materials +9.33%, and Industrials +7.99%, indicating that some high-valuation sectors still have price momentum support in the short term.

$Technology Select Sector SPDR Fund(XLK)$ $Real Estate Select Sector SPDR Fund(XLRE)$ $Consumer Discretionary Select Sector SPDR Fund(XLY)$ $Industrial Select Sector SPDR Fund(XLI)$ $Consumer Staples Select Sector SPDR Fund(XLP)$ $Materials Select Sector SPDR Fund(XLB)$ $Health Care Select Sector SPDR Fund(XLV)$ $Energy Select Sector SPDR Fund(XLE)$ $Utilities Select Sector SPDR Fund(XLU)$ $Communication Services Select Sector SPDR Fund(XLC)$ $Financial Select Sector SPDR Fund(XLF)$

However, the internal market is not uniformly overvalued. The Communication Services sector currently has a P/E ratio of 18.24x, staying in the Fair range across 5, 10, and 20-year dimensions; the Real Estate sector's P/E ratio is 32.46x, but it is shown as Undervalued over 10 and 20-year horizons, indicating clear differences still exist across sectors.

In addition, on the technical signal front, the Financials and Healthcare sectors were -2.04% and -1.22% relative to their 200-day moving averages, respectively, also demonstrating that not all sectors are in a synchronous expansion state.

From an allocation perspective, the core feature of the current US market is not simply an "expensive index," but rather the coexistence of high valuations and high divergence. High-valuation sectors still have trend support in the short term, but this also means that once subsequent earnings performance fails to match current pricing, these highly-rated sectors may face greater volatility pressure. Therefore, rather than saying the current US market is in a stage of uniform overvaluation, it is more accurate to say the market has entered a phase dominated by structural pricing, where valuation constraints rely more heavily on internal sector rebalancing.

III. From Fund Flows, Index Support Remains Notably Strong, Sector Allocation Continues to Diverge

Against the backdrop of overall high valuations and widening sector divergence, fund flows can further help determine whether the market is broadly chasing highs or undergoing structural repositioning.

According to ETF Db data, looking at fund flows from April 28 to May 4, the SPY, representing the overall performance of the S&P 500, recorded a net inflow of $45.1 billion, significantly higher than individual sector ETFs. This shows that the willingness to allocate capital at the index level remains very strong, and investors continue to maintain high interest in overall S&P 500 risk exposure.

In contrast, there was no consistent accumulation at the sector level. Capital inflows were mainly concentrated in Energy, Financials, Industrials, and IT, while Healthcare, Consumer Staples, Consumer Discretionary, and Real Estate generally faced pressure, showing that the internal market is still dominated by structural repositioning.

Overall, the market is not broadly adding allocations around a single sector, but rather continuing to make structural adjustments between sectors while maintaining overall allocations to the S&P 500. On one hand, capital support at the index level is significantly stronger than at the sector level, showing that investors have not significantly reduced their risk exposure to the overall US stock market. On the other hand, the differences in flows among industries remain clear, reflecting that the market still has allocation demand for the overall S&P 500, but judgments on internal industry prosperity, valuation cost-effectiveness, and future trading logic are inconsistent.

IV. Insider Trading Signals Show Some High-Valuation Sectors Still Face Strong Cash-Out Pressure

If the aforementioned stock-bond spread, sector valuations, and fund flows mostly reflect external market pricing and allocation behavior, then insider trading provides a supplementary perspective for observing internal sector risk appetite.

According to Fintel's latest data as of May 6, 2026, there remains a clear divergence in insider buy/sell signals across S&P 500 sectors: Insider sell/buy ratios in the IT, Energy, Utilities, Consumer Staples, and Industrials sectors are at relatively high levels, while Financials, Real Estate, and Materials are notably low.

Among them, the IT sector's latest ratio reached 10.85, rising further by 0.96 from the previous week. It is the direction most worthy of attention right now, indicating that while the sector maintains high prosperity and high pricing, insider willingness to cash out is also strengthening synchronously.

Although the latest ratios for the Energy and Industrial sectors remain high, they have retreated slightly on a weekly basis, showing marginal relief in selling pressure; meanwhile, Utilities and Consumer Staples continue to rise, indicating that defensive sectors are not immune to cash-out pressures internally.

Overall, insider trading does not negate the possibility of a temporary continuation of high valuations, but the signal it releases is: The risk appetite within high-valuation sectors is no longer synchronized, and future market performance will increasingly rely on earnings realization rather than continued valuation expansion.

V. M7's High-Weight Pattern Unchanged, Internal Valuations and Performance Diverge Significantly

From an index structure perspective, the M7 remains the core anchor for the S&P 500's performance. In April, its total market cap share rebounded to 34.78%, showing that pricing power at the index level remains highly concentrated in a few technology giants.

But this "high concentration" does not mean their internal trajectories are aligned. Looking at TTM P/E ratios, Tesla is as high as 357.45x, significantly above the rest; Nvidia (40.10x), Apple (34.45x), Amazon (32.72x), and Google (29.32x) are in mid-to-high valuation ranges, while Microsoft (24.50x) and Meta Platforms (22.01x) are relatively lower.

This week, the S&P 500 rose 0.4%. Within the M7, only Amazon (1.97%) and Apple (1.44%) clearly outperformed the index, Google (0.27%) slightly trailed, while Microsoft, Meta, Nvidia, and Tesla all underperformed the S&P 500, showing clear divergence has emerged among the heavily weighted leaders.

Recently, as Q1 earnings reports landed intensively, market focus has further shifted to whether AI capital expenditures can be effectively converted into earnings growth. This means that the subsequent impact of the M7 on the S&P 500 will increasingly manifest as the relative strength among these leaders determining the index's elasticity, rather than a universal lift driven by synchronized upward movement.

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VI. Conclusion

Overall, the core feature of the current US stock market is not a simple "broad overvaluation" or "broad optimism," but rather a phase closer to the coexistence of high valuations, strong support, and high divergence. The index's ability to maintain high levels still relies on earnings expectations, liquidity conditions, and support from heavyweight leading stocks. However, whether it is weak absolute stock-bond valuations, increased willingness of insiders in some sectors to cash out, or the divergence in valuations and returns within the M7, all indicate that the market's continued upward trajectory will increasingly rely on actual earnings delivery rather than simply relying on valuation expansion. Therefore, the key to observing US equities going forward is not just judging whether the index can maintain its strength, but also identifying whether the divergence between high-valuation sectors and core leaders will widen further, and whether this divergence will begin transmitting to the broader market level.