'Bubble may be far from bursting': Capital Economics says S&P 500 could hit 6,500 by end of next year

The S & P 500 index closed above 5,000 for the first time last week, raising concerns about its valuation. The index’s forward price-to-earnings (P/E) ratio now exceeds 20, a level not seen since February 2022, and higher than the historical average of 16. Despite this, Capital Economics suggests that the rally could continue. The research firm predicts that the S & P 500 could reach 5,500 by the end of this year and 6,500 by the end of 2025, comparing the current bubble to the dot-com bubble of the late 1990s. Artificial intelligence is considered the transformative technology driving the current market trend. The rally is concentrated in mega-cap tech stocks, but the rest of the market has the potential to broaden the rally. Capital Economics believes that sustained modest earnings growth could support the continuation of the rally through 2025.