S&P 500 Needs Profit Boom or Fed Cuts to Justify Lofty Levels

Few times in history has the US market grappled with as many headwinds as it’s faced in 2025: a new president rejiggering the global order, sweeping tariffs and a bout of uncertainty stemming from conflict in the Middle East. Stocks have still prevailed against all odds and sit just a whisker away from all-time highs.

But the higher the S&P 500 Index goes, the louder the concern that its multiples are starting to look frothy. The index is trading at 22 times expected profits in the next 12 months, 35% above its long-term average, data compiled by Bloomberg show. Of the 20 such valuation metrics tracked by Bank of America Corp. strategists, the S&P 500 is screening expensive on each one.