As 2026 begins, the mood on Wall Street is positive. There’s just one problem. That means stocks are very expensive. Savita Subramanian, a strategist at Bank of America, noted Wednesday that the S&P 500 has strong valuations in 18 of the 20 indicators she tracks. These include price-to-earnings ratio (P/E), enterprise value to EBITDA, and forward consensus PE. “If you look at market cap to GDP, price to book value, price to sales, price to operating cash flow, and enterprise value to sales, this benchmark has ‘never been this expensive,'” he said, adding, “There’s no way to surface that. The S&P 500 is expensive,” adding, “The risks to the index are significant in 2026.” 2026 CNBC Market Strategist Survey This represents a modest 3.8% increase from Wednesday’s close (US markets are closed Thursday for New Year’s Day).SPX YTD Mountain SPX Among the year-to-date risks, Subramanian said, there are parts of the market that are worth holding as the introduction of artificial intelligence leads to layoffs. It is cheap compared to historical market multiples. More importantly, there are good reasons why these sectors are cheap. In addition to a positive revision trend compared to the overall market, it has outperformed for three consecutive months. Taken together, these factors indicate high value,” Subramanian said. Healthcare and real estate lagged the overall market last year. The former rose by about 12% in 2025, while the latter fell slightly.
