The Weekly Update 10/10/2025™
“Bubble!”
The word of the day is Bubble! It seems like our news sources everywhere are reporting the valuations of Corporate America, as measured by the S&P 500, are so high that they appear to be a bubble that could “burst” or “crash”.
I would like to suggest that bubbles happen when no one is talking about it! As in NOT NOW!
As you read in last Friday’s edition of The Weekly Update, on 10/03/2025 (Read it Here). The earnings of Corporate America are what makes companies more valuable.
A quick way to measure risk is via a Price to Earnings Ratio, or P/E. Simply take the price of a company’s share value and divide it by what that company earns. The estimated P/E for the S&P 500 for 2026 is $304.59 per Fact Set on 9/30/2025.
The S&P 500 on 10/8/2025 is 6,753.72 divide that by estimated earnings of $304.59 from above and your P/E is 22.17x.
The 22.17x is well above the 10-year average of 19.6x per JP Morgan Guide to the Markets, 6/30/2025. As you might guess, the posterchild for a bubble value is chip maker NIVIDA. Since 2020 the shares have increased from about $15 per share to about $168… but earnings have exploded higher too.
Check it out.
NIVIDA trades at 26.6x, but earnings are projected to grow over 50% per year for the next two years. Thus, it is arguable that 26.6x is high, as there is some growth potential.
To point, note that lower right box where two grocery stores have P/E ratios of 47.8x or 34.4x.
So, to me tech does not appear bubble like, but grocery stores might! To me this suggests we are not in bubble territory, yet normal volatility is “always”, careful Jim, riding shot gun.
Five Year Money is key (Read it Here).
I’m interested in your thoughts, comments and observations. Feel welcome to call, email, or stop by the office and say Hi.
Respectfully,
James O. Lunney, CFP®
CERTIFIED FINANCIAL PLANNER™ Professional
*The economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that strategies promoted will be successful.
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