S&p 500 Index Premium Hits 100-Year High as Earnings Surge
The s&p 500 index is trading at its highest premium in more than 100 years when adjusted for prevailing Treasury bond yields. For investors, that means the benchmark is priced at an extreme that has rarely existed in modern market history even as earnings keep rising and credit risk stays subdued.
26% in 2023, 25% in 2024 and 18% in 2025 describe the S&P 500’s total returns across three straight years of gains, with the index also up 7.8% year to date as of June 12. That run has pushed valuations into territory where the Shiller price-to-earnings ratio sits at more than 41, while price-to-book and price-to-sales both stand at all-time highs.
Erik Norland Sees More Runway
28.6% aggregate earnings growth in the first quarter gives the rally a profit base, and analysts are projecting 22.8% full-year earnings growth. Erik Norland, a CME analyst, said current market trends could allow the bull market to continue for several more years, pairing strong earnings with a market that keeps absorbing high multiples.
1920 is the start of the historical comparison CME Group used for the yield-adjusted premium reading, and the current level is the highest in more than 100 years. The same dataset shows the S&P 500’s market capitalization is double trailing-12-month GDP, with the market-cap-to-GDP ratio at its highest level since 1929.
Credit Spreads Near Lows
End of May credit spreads remained near their historic lows, leaving stock valuations without the kind of credit stress that often arrives when risk appetite fades. That combination — record-rich equity pricing, strong earnings growth and tight credit — helps explain why the market can look expensive on one measure and still keep advancing on another.
CME Group analysts also found that corporate earnings as a percentage of GDP peaked 15 to 36 months before stock prices peaked in 2000 and 2007. If that pattern repeats, the market’s current earnings strength could keep supporting prices for a while longer, even though the valuation gap versus Treasury yields is already at a century-plus extreme.
