Barclays: S&P 500 Valuation May Indicate a Turning Point

Barclays analysts point out that the S&P 500 is currently trading at 22 times its expected earnings over the next twelve months, and valuation alone may not become a major obstacle for stocks.

They noted that historically, once valuations exceed 22 times, average returns tend to improve and volatility decreases, suggesting that if earnings growth remains positive, a bear market capitulation may occur.

They highlighted past examples such as 1998 and 2020, when similar valuations appeared after sharp sell-offs and strong rebounds. Although short-term volatility may increase due to fiscal uncertainty and impending tariff impacts, Barclays believes that based solely on valuation, the market's downside risk is limited, especially if earnings grow as expected (around 9% by 2026).

In short, despite the risks, the current valuation may support further market gains.

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