Goldman Sachs says equal-weight S&P 500 is now trading 13% above estimate of fair value

Goldman Sachs says stocks are over valued, not just the Magnificent Seven or tech stocks. In brief from a note:

• equal-weight S&P 500 is now trading at 17 times forward earnings, 13% above Goldman’s estimate of fair value

GS draw out the implication that high valuations typically lead to weaker returns over the months ahead, but not yet:

• Goldman says it typically takes four months after crossing the 10% overvalued threshold for the equal-weight index’s valuation to peak (the index passed that level in February)
• overvaluation persists for 10 months on average
• overvaluation eases as earnings improve, but in instances where the index has sold off, a downturn in economic growth has been the most obvious catalyst

This article was written by Eamonn Sheridan at www.forexlive.com.