scroll

Do you see a bubble in US shares

Advanced Search

Our Q&As are emailed in our Saturday Morning Report, find the answer to this question below.

Ask a question

The Latest Q&A

Question asked 03/10/2025

Do you see a bubble in US shares

Hi team Big fan of your company and long-time subscriber. I have a question regarding your thoughts on where the s&p 500 index will reach by the end of the year (Dec 2025). Current forward pe is 29.9 x including the mag 7 and 21.5 x excluding the mag 7 with the long-term average being 15.5 x. ISM manufacturing PMI has been under 50 for several months indicating a contraction of manufacturing in the USA. Jobs growth has been weak however inflation has been sticky. However, the Fed has at the last meeting turned dovish? . Does this mean we should not fight the and interest rates are on the decrease? So where does Markets Matter see the index over the next couple months. Is it grinding higher or deflating quickly? I have no idea! So I look forward to hearing your thoughts! Thanks Andrew

Answer

Hi Andrew,

Thanks, you for the support and kind words. I definitely wouldn’t say you have no idea, reading between the lines of your well-informed question our “guess” is you think it should be falling but it continues to make new highs.

US stocks are enjoying an excellent year having shrugged off fears around the impact of tariffs on the global economy. Supporting stocks is the “Goldilocks Scenario” which we often reference:

Credit markets are factoring in 4-5 interest rate cuts by the Fed over the next year.
Earnings remain robust with the 2Q coming in well ahead of expectations with Mag 7 front and centre.
The US economy is doing “OK” showing reasonable growth and resilient consumer spending, although it faces rising risks from a cooling labour market, sticky inflation, and probably further political disruptions.
For all the trepidation that has washed through markets President Trump is exerting a net positive impact on stocks.
We are in the midst of two structural bull markets, electrification and AI, which are having positive impacts across a number of sectors/industries. We think these themes have more to go, and their positive ramifications on stocks implies there is more juice left in the tank.

Hence at this stage we’re not prepared to “fight the tape” and our best guess for the S&P 500 to finish 2025 is ~7000, or 4-5% higher, although a hiccup along the way does feel overdue.

chart

US S&P 500 Index

LAST UPDATED 03/10/2025 11:23

Latest Reports

Weekend report 25/10/2025

Weekend Q&A: Gold stocks pass the performance baton to oil and lithium names

The ASX200 ended the week up +0.3% with 8 of the main 11 sectors advancing. It was another week that saw investors “buy dips” while preferring to rotate between stocks/sectors as opposed to selling the market per se. Momentum traders had a week to forget with precious metals stocks getting whacked as gold and silver experienced their worst day in more than a decade, and even on Friday, gold traded in a $US100/oz range, although it again held support ~$US4,000.

Afternoon report 24/10/2025

The Match Out: stocks drift lower ahead of key US-China trade meeting

The ASX eased into the weekend as investors stayed cautious ahead of next week’s high-stakes meeting between US President Donald Trump and China’s Xi Jinping, while news of the abrupt termination of US-Canada trade talks also added some complexity to the mix.