"While the S&P 500 has notched a terrific year by all accounts, with gains of roughly 16%, the underlying foundation of this really is being tested by a series of significant policy shifts."
"As we enter the final two weeks of 2025, what was once a theoretical debate about trade policy has become a confirmed economic headwind. New research from the Federal Reserve confirms that concerns regarding slowing growth are not just market noise anymore, but are backed by 150 years of solid data. With valuations now sitting at historical extremes and consumer sentiment at multi-decade lows, the dual combination of these factors signals that"
"As of December, the index is carrying a price-to-earnings (P/E) of 22.4x, which is significantly higher than its 5-year average of 20x and a 10-year average of 18.7x. Historically, when the S&P 500 has exceeded this 22x threshold, something it has only done twice, during the dot-com bubble and 2020 pandemic, both of which were followed by sharp market corrections."
The U.S. stock market returned about 16% in 2025 while facing conflicting economic signals and policy shifts. Investors prioritized artificial intelligence and an easing rate outlook even as universal tariffs introduced fresh uncertainty. Federal Reserve research links slowing growth concerns to 150 years of data, elevating the status of those worries beyond market noise. The S&P 500 trades at a 22.4x P/E, above five- and ten-year averages and near historical extremes. High valuations combined with multi-decade low consumer sentiment increase the likelihood of a corrective phase for investors to consider.
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