Aniket PujariStocks have been on the backfoot for weeks, leaving many investors in search of a silver lining. One of those may be that equities are now trading at a discount to the levels they were when the S & P 500 was at an all-time high in February. But Deutsche Bank warns that U.S. stocks may still be expensive. “We remain close to the most expensive U.S. equity valuations in history seen back in 2000,” strategist Jim Reid wrote, citing the S & P 500’s cyclically adjusted price-to-earnings ratio (CAPE). CAPE compares current prices to earnings over the past 10 years. By that measure, the S & P 500 is trading at more than 35 times earnings. For context, CAPE peaked at about 45 during the dot-com bubble that burst in the early 2000s. “At face value, it looks like a bubble; however, you could argue the tech sector has the potential to see a structural shift in U.S. earnings relative to the long-term trend,” Reid wrote. Technology was the market leader in 2024, as investors scooped up shares to gain exposure to artificial intelligence beneficiaries. This year, tech is struggling, losing more than 7%. The near-term outlook for the overall market looks grim, unless tech is able to regain its mojo down the road. Barclays lowered its 2025 S & P 500 target to 5,900 — lowest on the Street — from 6,600 as pressure from rising trade tensions dents investor sentiment. The bank’s forecast implies little to no upside from where the benchmark began the year. “Our base case assumes that earnings take a hit as tariffs (higher China tariffs stick but do not escalate, reciprocal tariffs amount to 5% on [the rest of the world]) contribute to material slowing in U.S. activity that nonetheless stops short of outright recession,” strategist Venu Krishna wrote . “Given significant uncertainty around trade policy, our bull and bear case EPS estimates hinge upon the final scope and severity of tariffs (60% probability).” Elsewhere Wednesday morning on Wall Street, Morgan Stanley initiated Tenet Healthcare with an overweight rating and a price target that implies upside of more than 26%. “A significant business model and balance sheet transformation has yet to be captured in THC’s multiple,” analyst Craig Hettenbach wrote to clients . “Risks of government spending cuts likely remain an overhang near term, providing entry points for patient investors in what should emerge as a much cleaner story and durable business.”
