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 future twelve-month earnings, and valuation alone may not be a major barrier 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 surrender could occur.

They emphasized past examples, such as in 1998 and 2020, when similar valuations appeared after severe sell-offs and strong rebounds. Although short-term volatility may intensify due to fiscal uncertainty and upcoming tariff impacts, Barclays believes that based solely on valuation, the downside risk for the market 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.