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MarketsNov 5, 2024

Stocks Are Heading For Their Best Performance This Century — But Their Rich Valuation Has Some Investors and Operators Sitting This One Out

Equity Froth

Noah Weidner

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There are just 57 days — and only 37 trading days — left in 2025. And if we’re keeping score, this year might be the best for the S&P 500 in modern history… if it can hold on. Up 21% year-to-date, America’s most-valuable index has attracted a rich valuation due to the heavy concentration of Big Tech stocks. This could be tested as the markets assess the election results and prepare for their annual bout of holiday selling.

The S&P 500 is now trading at a 26.1x price-to-earnings (P/E) ratio, up from 19.7x this time last year, according to WSJ — putting S&P stocks at their richest valuations since early 2022, according to FactSet.
Tech stocks driving big returns in the index this year are to blame for the high valuations — the top 10 stocks in the index have a 49.3x P/E, while some stocks, like Tesla, are trading at over 100x.

Vibe check: Of the 505 components of the S&P 500, 366 are up this year, and 151 of them are outperforming the market, particularly tech heavyweights like Nvidia and Meta. Fetching these rich valuations, some investors reckon a pullback is coming. Companies also assume that deals could be on the horizon, with share buybacks slowing to pandemic lows earlier this year as firms held off on repurchases. Compounding this, Berkshire Hathaway ($BRK.B) did not buy back any stock for the first time in six years — even as it sold shares and amassed a $325B cash position.