US indices hit new highs yesterday. Today's lack of trading sessions is causing a slight correction in futures contracts, although it's hard to speak of a clear sell-off. The main US indices remain just over 0.6% down. After the sell-off caused by "Liberation Day," US index quotes rebounded very strongly, recouping losses and reaching new highs. However, the euphoria of the US market has less and less to do with a fundamental improvement in the market situation.
Firstly, the S&P 500 index is being pushed up by a relatively smaller number of companies. Most sectors have performed worse than the broad index since April, with its gains primarily driven by the technology sector. Given the sentiment from 2024, this shouldn't be surprising. However, what might be alarming is that these new index highs are accompanied by over 3 times fewer companies hitting their all-time highs than during the previous index peak.
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Create account Try a demo Download mobile app Download mobile appSecondly, the share of equities in household portfolios remains at a historically record high in 2025, which could pose an increasing challenge to maintaining demand from individual investors.
It's also worth looking at company earnings forecasts. Both estimated sales and EPS for the index for 2025 and 2026 remain over 3% lower than at the February peak. An even greater discrepancy is visible in the Russell 2000 index. It's worth remembering that risks the market has completely abandoned (i.e., higher tariffs and their impact on the US economy) are still on the horizon, which could affect company results.
Comparison of S&P 500 index valuation to projected EPS for 2025 (yellow line) and 2026 (blue line). Source: Bloomberg Finance L.P.
Comparison of Russell 2000 index valuation to projected EPS for 2025 (yellow line) and 2026 (blue line). Source: Bloomberg Finance L.P.
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