The S&P 500 officially notches a new record over 6,500—but investors shouldn’t get too giddy
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History has shown that when stock valuations rise this far into the stratosphere, they eventually come back to earth.
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investment
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August 28, 2025
09:33 PM
Fortune
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Finance·The S&P 500 officially notches a new record over 6,500—but investors shouldn’t get too giddyBy Shawn TullyBy Shawn TullySenior Editor-at-LargeShawn TullySenior Editor-at-LargeShawn Tully is a senior editor-at-large at Fortune, covering the biggest trends in , aviation, , and leadership.SEE FULL BIO Investors are feeling bullish—but should they be?A few weeks ago as the S&P 500 hit a new record, this reporter noted that the index virtually hit a landmark reading, a price to earnings ratio of 30
I actually cheated a bit, as I pointed out in the piece: The actual figure was around 29.85, close enough that I rounded it to 30
The point then was, this is a big, big number that you seldom see mentioned by Wall Street analysts or pundits, who’d rather cite a lower, more marketable multiple based on “next year’s” (always over-estimated) fits or “operating earnings” that exclude real charges as basic as interest expense
But now it’s in the record books: At 2:35 PM on August 28, the S&P hit another fresh summit at 6501, and the real, not-rounded-up PE hit 30
That ratio’s based on what matters most, GAAP earnings posted over the last four quarters, fits that really happened as opposed to usually over-rosy predictions
The only span in recent decades when big cap stocks have been this expensive: Ten quarters during the frenzy that stretched from Q4 of 1999 to Q1 of 2022. (The PE also briefly exceeded 30 during the pandemic and ing the GFC, but only because earnings collapsed, sinking the denominator and skewing the multiple artificially low.) As I noted, on the macro scene, the danger signs are multiplying
The employment report from the Bureau of Labor Statistics disclosed that the U.S. added a meager 73,000 jobs in July, and revised the May and June figures radically downward, bringing total net hires for the past three months to just 106,000, less than one fourth the increase for the same period last year
Heather Long, chief economist at Navy Federal Credit Union, described the feeble data as a “game changer” demonstrating that “the labor market is deteriorating quickly.” GDP growth has also ved disappointing, clocking far below the Trump administration’s highly aspirational target of 3%
The economy expanded at an annualized clip of just 1.75% through the first half of 2025, way down from the 2.7% average in Q3 and Q4 of last year
The Congressional Budget Office (CBO) is forecasting tepid expansion of 1.7% to 1.8% from 2026 to 2035, not nearly fast enough to shrink the federal debt that the agency jects will swell from 100% of national income this year to 110% by 2031
So what does that mean for investors now? A 30 PE means you’re getting only $3 in earnings for every $100 you pay for S&P stocks
As recently as late 2022, you were getting $5 for every $100 invested
And the jump in stock prices didn’t occur because earnings soared
Since then, they’ve barely matched inflation
No, the huge ramp in recent years came strictly because PEs jumped, making stocks more and more expensive
That doesn’t mean stocks will crash tomorrow, or next week or next month
But history has ved time and time again that when valuations rise this far into the stratosphere, they are bound to come back to earth eventually.Introducing the 2025 Fortune Global 500, the definitive ranking of the biggest companies in the world
Explore this year's list.
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