Market Update 9/24/25

Stocks at All-Time Highs: Why Market Valuations Still Make Sense

The current clamor in investment markets is centered on stock valuations, with the indexes trading at all-time highs. With the S&P 500 valued at 25 times earnings, that’s a fair concern—and seasonality adds to the debate, as September and October are historically tricky months for equities.

That said, there are two important factors supporting valuations today.

First, productivity gains. According to the Bureau of Labor Statistics, productivity grew 3.3% last quarter. Advances in AI and other efficiencies are making companies more profitable, which justifies higher stock prices.

Second, lower interest rates. The 10-year Treasury yield has declined by half a percent since January 1st. Because Treasury interest is guaranteed while stock earnings are not, rates serve as the baseline for valuing all other assets. With the S&P 500 at a P/E of 25, its earnings yield is about 4%—roughly equivalent to the 4% yield on the 10-year Treasury.

In that context, stocks appear fairly valued relative to interest rates. If high valuations are the concern, the solution isn’t necessarily to step away from the market, but to focus on lower P/E opportunities. That’s the approach I’m taking right now.