S&P 500 Earnings for 2025 Q2: Is This the Most Overvalued Market Ever?
Key Takeaways
- By historical P/E standards, the S&P 500 is sitting well above its normal valuation range.
- Since the early 1990s, the market has rarely dipped into fair or undervalued territory.
- Earnings are projected to trend higher through mid-2026, but that can put pressure on the market.
S&P 500 earnings are in for 2025 Q2, and the numbers are raising eyebrows. Here’s our valuation analysis.
The following chart shows the normal value range of the S&P 500 Index, indicating where the S&P 500 would have to be to have an overvalued P/E of 20 (red line), a fairly valued P/E of 15 (blue line), or an undervalued P/E of 10 (green line). Annotations on the right side of the chart show where the range is projected to be, based on earnings estimates through 2026 Q2.
Historically, price has usually remained below the top of the normal value range (red line). However, since about 1998, the index has been exceeding normal overvalue levels, sometimes by a lot. The market has been mostly overvalued since 1992, and it hasn’t dipped into undervalued territory since 1984.
Where We Stand Today
You could say that this is the "new normal." But by GAAP (Generally Accepted Accounting Principles) standards, it’s anything but normal.
We use GAAP earnings as the basis for our analysis. The table below shows earnings projections through June 2026. Keep in mind that the P/E estimates are calculated based on the S&P 500 close as of September 30, 2025. They will change daily depending on where the market goes from here. Note that the P/E remains outside the normal range.
The following table shows where the bands are projected to be, based on earnings estimates through 2026 Q2.
The DecisionPoint chart below keeps track of S&P 500 fundamentals, P/E, and yield. It’s updated daily – not that you need to watch it that closely, but it is up-to-date when you need it.
The bottom line? We are looking at the most overvalued market ever (https://www.hussmanfunds.com/comment/mc250924/). The P/E is still well above the normal range, and earnings have ticked up and are projected to trend higher for the next four quarters. High valuation applies negative pressure on the market, but other, more positive factors can keep the market in overvalued territory.
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