'The new normal': Wall Street says high stock valuations may be here to stay

Core Viewpoint - The S&P 500 is trading near record highs, prompting strategists to reconsider what constitutes a normal market environment in light of current valuations and economic conditions [1][2]. Group 1: Market Valuation Perspectives - Bank of America equity strategist Savita Subramanian suggests that current multiples may represent a new normal rather than reverting to historical averages [2]. - CFRA Research's Sam Stovall indicates that while valuations are high compared to long-term averages, they appear more justified when viewed against the last five years, characterized by strong fundamentals and megacap leadership [3][4]. - Over the past 20 years, the S&P 500 trades at approximately a 40% premium to its long-term average on forward estimates, but this premium reduces to a high single-digit range when considering the last five years [4]. Group 2: Broader Investor Sentiment - The discussion on valuations has extended beyond Wall Street, with Fed Chair Jerome Powell acknowledging that markets seem "fairly highly valued," reminiscent of Alan Greenspan's "irrational exuberance" warning in 1996 [5]. - Sonali Basak from iCapital highlights the historical context, noting that after Greenspan's warning, the market continued to rally for years, leading to significant missed opportunities for investors who attempted to time the market [6][7]. - Barry Ritholtz warns that trying to predict market peaks can be a costly endeavor, emphasizing the risks of being sidelined during market rallies [8].