Analysis: The S&P 500 index needs a significant rise in earnings or a rate cut from The Federal Reserve (FED) to justify its high levels.

Gate News bot news, the US stock market is rising against the trend in 2025, just a hair's breadth away from its historical high. However, the higher the S&P 500 index rises, the stronger the concerns about its valuation multiple becoming a bubble.

Data shows that the price-to-earnings ratio of the index, based on expected profits over the next 12 months, is 22 times, which is 35% higher than the long-term average. Among the 20 such valuation metrics tracked by Bank of America strategists, the index shows overvaluation on each of the metrics.

Kevin Gordon, a senior investment strategist at Charles Schwab, stated: "The current level of the market is sustainable, but we cannot have high confidence on the question of 'from here on'. The optimistic expectations for earnings in the second half of the year may be too high, coupled with multiples nearing cyclical highs, which will require earnings to exceed expectations." In addition to earnings growth, the strategist also mentioned that significant interest rate cuts by the Federal Reserve will be another way to narrow the gap between the fundamentals of the index and market prices.

Source: Jinshi