Bank of America reports the S&P 500 is highly valued as 2026 begins, with several market risks ahead. However, sectors like healthcare and real estate offer good potential.
U.S. stock market valuations are high
18 of 20 metrics show expensive S&P 500
Potential gain of 3.8% in 2026
Labor market slowdown as a risk
Healthcare and real estate are cheaper
Positive trends in selected sectors
S&P 500 year-end forecast is 7,100
Bank of America reports that the U.S. stock market, particularly the S&P 500, is expensive as the new year begins. Key metrics indicate high valuations, presenting risks for investors.
High Valuations for U.S. Stocks
Bank of America strategist Savita Subramanian highlighted that the S&P 500 is registering high valuations in 18 out of 20 metrics she tracks. This includes metrics like price-to-earnings ratio and enterprise value to EBITDA.
Subramanian states that the S&P 500 has “never been more expensive” when analyzing market cap to GDP and other factors. She warns that “the S&P 500 is expensive,” emphasizing potential risks throughout 2026.
Forecast and Market Challenges
Subramanian predicts the S&P 500 will end 2026 at 7,100, reflecting a modest 3.8% increase from the last close. This forecast is the lowest among analysts surveyed by CNBC.
She identifies one of the major risks as a slowing labor market due to job cuts related to artificial intelligence. Despite these challenges, she believes there are good investment opportunities in certain sectors.
Investment Opportunities in Healthcare and Real Estate
Subramanian recommends focusing on healthcare and real estate, which are relatively inexpensive compared to historical values. She mentions that these sectors are performing well in light of broader market trends.
In 2025, healthcare saw about a 12% rise, while real estate slightly decreased. Positive trends and recent performances indicate these sectors may offer good value for investors.
Sophia Clarke is a senior international journalist with nine years of experience covering global politics, human rights, and international diplomacy.
She earned her M.A. in International Relations and Journalism from the University of Oxford (2016), where she specialized in global governance, conflict reporting, and cross-cultural communication.
Sophia began her career as a foreign correspondent for BBC World Service and later joined The Guardian, where her insightful analyses and on-the-ground reporting from Europe, the Middle East, and Latin America earned her recognition for accuracy and integrity.
Now based in Paris, France, Sophia contributes to Faharas NET, providing comprehensive coverage of diplomatic affairs, humanitarian issues, and policy developments shaping the international landscape. Her storytelling combines investigative depth, journalistic ethics, and a strong commitment to amplifying underrepresented voices in global dialogue.
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