The average S&P 500 stock — not just the 'Magnificent Seven' — is overvalued, Goldman says (2024)

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The average S&P 500 stock — not just the 'Magnificent Seven' — is overvalued, Goldman says? ›

The average S&P 500 stock is as overvalued as the 'Magnificent Seven,' Goldman says. The average S&P 500 stock has joined the Magnificent Seven in overvalued territory, according to Goldman Sachs Group.

Thus the percentages on the vertical axis show the over/undervaluation as a percent above mean value, which we're using as a surrogate for fair value. Based on the latest S&P 500 monthly data, the market is overvalued somewhere in the range of 92% to 154%, depending on the indicator, up from last month's 88% to 148%.

Dubbed the Magnificent Seven stocks, Apple, Microsoft, Google parent Alphabet, Amazon, Nvidia, Meta Platforms and Tesla lived up to their name in 2023 with big gains. But the middle part of the second quarter of 2024 showed a big divergence of returns.

Stock Valuations in July 2020 vs.

Today, the S&P Composite sits at 154% above the trend line! The stock market is definitely overvalued from a historical perspective.

The 'Magnificent Seven' stocks are actually undervalued vs. the rest of the market, JPMorgan says | Morningstar.

Investors' concerns that the Magnificent Seven bubble may soon be about to burst could be completely unfounded, according to new analysis from JPMorgan, which argues the top-performing tech stocks are actually undervalued compared to rival stocks.

Warren Buffett's stock purchases in the most recent quarter include Chubb Limited (CB) and Occidental Petroleum (OXY). HP Inc. (HPQ) and Paramount Global (PARA) are among Warren Buffett's stock sales in the most recent quarter. The Berkshire Hathaway portfolio includes 41 stocks as of May 2024, including Apple Inc.

Rakesh Jhunjhunwala was known as "India's Warren Buffet" and "The Big Bull". He was a well-known and helpful stock market expert in India. Rakesh, the son of a salaried officer, entered the stock market after graduating as a contractual bookkeeper. After that, he was a stock trader.

How to tell if a stock is overvalued? ›

This ratio is used to assess the current market price against the company's book value (total assets minus liabilities, divided by number of shares issued). To calculate it, divide the market price per share by the book value per share. A stock could be overvalued if the P/B ratio is higher than 1.

The so-called Buffett indicator compares the total market capitalization (share prices times outstanding shares) of all U.S. stocks with the quarterly output of the U.S. economy.

If investors purchase overvalued stocks at inflated prices, they will likely experience significant losses when the price eventually corrects its intrinsic value. This can cause long-term damage to an investor's portfolio and retirement savings.

“For whatever reasons, markets now exhibit far more casino-like behavior than they did when I was young,” Buffett wrote in the letter.

S&P 500 index price is 5304.7202. The S&P 500 GF Value is 4840.95. Therefore, S&P 500 index's Price-to-GF-Value for today is 1.10. Based on the relationship between the current index price and the GF Value, GuruFocus believes the US stock market is Fairly Valued.

In our 2Q 2024 Quarterly US Market Outlook, we noted that at the end of March 2024, our price/fair value metric for the US market was 1.03. At a 3% premium, the market had not officially entered overvalued territory, yet we noted that it was definitely feeling stretched.

The overall conclusion is that a fair value of the S&P 500 index based on its trailing GAAP earnings is probably about 4234 as a point estimate.