Have stock markets peaked? Tune out the noise

Markets have been hitting new highs and some valuations – particularly in the US – look elevated.

It’s natural to wonder, therefore, if we’ve reached the peak?

However, here at Raymond James Monument, we believe the better question is, ‘how do we position portfolios to meet long-term goals, regardless of short-term noise?'

Valuations: A mixed picture

While US valuations appear stretched, with the S&P 500 trading at a price to earnings ratio of approximately 28–29x, excluding the top ten companies brings that down to roughly 19x, much closer to historical norms.

Those top tech names have justified their premium with strong earnings growth – 30 per cent in 2024 and an expected 20 per cent this year – and massive capital expenditure commitments into artificial intelligence and infrastructure.

Outside the US, valuations look far more attractive:

· UK, Europe, Asia and emerging markets remain reasonably priced

· China is still very cheap and has significant firepower to stimulate growth

· India looks expensive, but long-term growth prospects remain compelling

· Emerging markets overall trade on undemanding valuations, supported by a weaker dollar and strong commodity demand

While market volatility has been high in recent years, studies suggest a diversified portfolio across regions can reduce volatility by up to 30 per cent compared to single-market exposure.

Macro tailwinds: Why we’re still constructive

Several factors underpin global markets:

· Interest rates are falling: Inflation is closer to target in many countries, and central banks are cutting rates. The Bank of England is expected to reduce rates to around 3.5 per cent over the next 12 months, balancing sticky inflation with weak growth.

· Stimulus and growth: Germany’s €500 billion stimulus package supports European markets, while China and India continue to invest heavily in infrastructure and technology.

· Liquidity waiting to move: There is roughly $7 trillion in money market funds. Lower rates could see some of this reallocated to equities and bonds, providing additional support.

· Capex commitments: Global long-term spending on artificial intelligence, renewable energy and infrastructure remains robust, driving long-term growth.

Short-term risks versus long-term perspective

Could markets correct? Absolutely.

History shows that corrections of ten per cent or more occur every one-and-a-half years on average.

But timing them is notoriously difficult – and costly.

Missing just the ten best days in the market over a decade can halve your returns.

Equities often climb a wall of worry.

Even if tech pauses for breath, other sectors such as healthcare and industrials, for example, are seeing solid earnings growth.

With the US Federal Reserve likely to cut rates twice more this year, the backdrop remains broadly supportive.

Your portfolio: Built for resilience

A well-balanced portfolio isn’t just about chasing returns, it’s about managing risk and staying prepared for different market conditions.

Many long-term investors follow a diversified approach.

They often combine:

Equities – domestic and international markets to capture global growth opportunities

Bonds, cash, infrastructure and gold – to provide stability and limit exposure to market swings

Within equities, sectors like technology and artificial intelligence continue to attract investment, but balance across industries and regions helps ensure resilience.

Why selling out isn’t always the answer

Selling out of equities now risks missing potential upside and getting caught in false rallies.

Reinvesting after a sell-off is notoriously hard.

History shows that staying invested through volatility delivers better long-term outcomes.

Take Trump’s liberation day – April 2, 2025 – when he announced sweeping tariffs, reshaping global trade as we knew it.

Despite initial widespread panic and a sharp 11 per cent drop in the S&P 500, over the next few trading days, markets rebounded quickly.

Within a week, the index surged nine per cent in a single day.

Who would have thought since April 7 that the S&P 500 would rally 34 per cent (USD terms), and even the FTSE 100 is up 25 per cent.

This year, in particular, underlines a key lesson: Volatility often precedes opportunity, and missing the rebound can be more damaging than enduring the dip.

Key reasons why we remain positive

· Ex-US markets are not too expensive

· Earnings growth generally supports current valuations

· Inflation is closer to target globally

· Interest rates are falling

· Some of the trillions in cash could flow into equities

· Long term commitments to artificial intelligence, infrastructure and renewables

· Economic growth expected to reaccelerate next year

There will be winners and losers, of course, and our job is to help you run with the winners while being active.

Final thought

Markets may feel high and volatility is inevitable.

But your financial future doesn’t hinge on calling the top.

It depends on having a plan, staying disciplined and investing with purpose.

At Raymond James Monument, we are helping clients look beyond the noise and toward the horizon.

Because while markets fluctuate, your goals don’t.

Email james.carrick@raymondjames.com for more information, or visit www.monument.raymondjames.uk.com.

James Carrick is a Chartered wealth manager at Raymond James Monument

Any opinion or forecast reflects the judgment as at the date of issue and is subject to change without notice. Past performance is not a reliable indicator of future results. This commentary is intended for information purposes only and no action should be taken or refrained from being taken as a consequence without consulting a suitably qualified and regulated person. With investing, your capital is at risk.

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