Is The S&P 500 Overvalued?
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- Опубліковано 7 лют 2025
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If I keep telling you a crash is coming, eventually I’ll be right
😂
Even a broken clock is right twice a day...
The one point that sticks out with Buffets cash pile at the moment is that he's always said that Berkshire Hathaway would never have money lying around just for the sake of it. They always like to have their money working for them in some way, so to now be building a bigger pile than ever just raises some red flags. It's rarely a bad move to just follow what the big money is doing. Long term DCA into an index is still the way though.
If I had to gamble, it would have to be with the recent announcement that Trump is planning on changing the way that these hedge funds are taxed
clear and concise pov toby, great work as always. "A simple rule dictates my buying: Be fearful when others are greedy, and be greedy when others are fearful." WB
Excluding the Mag7 the s&p500 P/E ration at the end of last year was 19.5. Given the average is 17.5ish it would seem to be the case that technology may be frothy but certainly not the overall index.
As you mentioned, tech will also have a higher p/e ration because of the margins. It's almost nothing to scale up a software subscription to more and more people compared with 'offline' companies where to increase output you need to build offices or factories, employ more people, etc.
the argument about tech having a higher PE only applies if is rapidly growing. If it has a decline in sales the reverse is true as almost all loss in revenue hits the bottom line
The title gave me a heart attack , but you always give good advice and I’m in it for the long haul or at least until I retire
Thanks very much for your videos, they're very illustrative and useful for newcomers like me.
Very well said Toby!!
I’ll continue to invest into a global index and not be concerned about trends
The thing is the price of stocks are valued against fiat currency that is a depreciating asset. With a few years of high inflation, the values need to go up just to stay level in teal term.
Thanks Toby - Good clarifying video. I've increased by cash assets, from 3 years to 4 years. Still heavily into longer term investments, but I'd expect a bit of a slower period... But more concerning for me is not the fundementals, as over time I am comfortable the markets will continue to increase over the longe term, but more the volatility being injected following the US election and the unpredictability of the personalities at the top. Hence, having a bit more cash available to weather the storms. Thanks again!
Toby excellent video mate, I will continue to DCA in.
Sure is but where else should you put your money?
Pokémon cards
Hoovers and blow.
well, at age 94, I would say he is prepping for retirement. Global index is on most investors portfolios so shouldnt be overly concerned about one companies money stockpile. There will always be innovation in the world so keep on truckin as they say.
Thank you. I would much rather listen to a wise elder than anyone else. All the very best to you. ❤
Great video! Very informative compared to other videos out there creating click bait! Thank you
Great video as always, looking forward to your next one Toby
UK equity stocks are well outperforming US ones already this year. Interesting times !
I'm already looking forward to my end of 2025 review! Be very interested to see how things go
@@TobyNewbatt certainly doesn't look like it's going to be a typical year ahead :)
Thanks for your content.. as someone who is just starting.. much appreciated 🙏
Welcome!
Just buy and hold for many year's. In index fund's much better then having your money in the banks
Interesting. Tx!
You are the absolute boy Toby!
Side note- I know you’re an IE user, do you think they will be here in 20-30 years?
I hope so, but there's no way to know that for any company at all :) - there are hardly any UK platforms who have been around for that long in the first place!
As I always say, long term it's about where you deduce is the best environment to run a business from. For me it's the US hands down. It's the most capitalist and individualistic country in the world and it's not even close.
Crazy that people are buying stocks without understanding that companies listed in a certain countries operate globally. It's not the 1800's 😂
Great video, Toby! I just wanted to add another issue with this Buffett indicator. What percentage of total revenue comes from publicly traded companies? I’m sure this has increased over the years. A large share of my spending goes toward them, whereas for our grandparents, publicly traded companies played a much smaller role in their daily transactions. And if we go back to the 19th century, only a tiny fraction of companies were publicly traded.
Excellent point. Another reason why GDP is so useless as a metric to compare the stock market to.
Toby Hoarding cash can help with the mental side of investing.
Market goes down you’re happy because you get to deploy some of that cash at a discount. Market goes up you’re happy because you’re making money.
Look at it as dip Insurance that makes you 5%
Could you make video on how to calculate how much tax to pay with trading212 invest account? Will be cashing out before new tax year in April.
You can just google a capital gains and dividends tax calculator - HMRC even have useful tools on their website :) - good luck!
Does it matter how much a share of s&p 500 costs or are they all the same? Thank you I'm new to investing.
The price of an ETF tracking an S&P fund is irrelevant. The other things are such as their expense ratio, tracking error, tracking method and size/ liquidity etc
It would be interesting to make a graph of stock market p/e over the total global money supply. If in the last 10 years the global money has increased 10 fold, then the prices today are in a deep
This would be interesting - however it would still not be a useful or relevant tool. The valuation of companies is based on a future that we don't know yet - and comparing the companies of the past has no use when they are completely different companies and we live in a very different world :)
@ very true! What I wanted to say is that the evaluation of everything depends on inflation. We are entering a huge inflation era for 2 reasons:1) it proved that can solve the economy cycles crisis much better than the reset logic (better inflate than destroy) and 2) reduces global debt. So maybe a correlation of inflation/money supply towards current stock values? To put it more simple. If in the planet there is 100trilions of money and Microsoft stock is 100$, if the global supply becomes 800trilions, the same company should worth 800$. Do we have a graph or data to show that over time?
Don't care, will continue to DCA every Wednesday 😁
Legend!
Why Wednesday, not other day?
@ Gives me something to see mid week 😅 Automatically does it thing and I get the email.
Sorry, I am new to investing. What does DCA stand for?
@@campbellmackay7711 Dollar cost average.
Thank you Toby, excellent content as always.
Waiting for April to contribute to my existing stocks and shares ISA.
Should I put £20K in on day one or £1666 each month?
Thank you.
It's really up to you - but the data says that lump sum is almost always best if you are a long term investor.
Thanks so much for replying Toby.
I really look forward to your videos.
Like every topic or interest, there’s such a lot of dross online.
Keep investing 😊
@@colinholder6080you could dca and if there is massive market dip the lump sum the rest
Toby what indexes are you investing in? Particularly Vanguard.
I share all of my investments on my channel :) - you just need to go and watch them
I think like many say, the most important decision to make is if you wanna invest for 5-10 OR for 30-40 years. If it’s the first then DCA and careful selection is a must. If it’s for 30-40 years then whenever you buy a global etf , you will certainly get a profit. Cause if humanity isn’t profitable at a 30-40 year cycle, investment choices is the least of your problems!
if the market is bad for 30-40 years - picking stocks will be the worst thing you could do :) - Only 3% of all companies have ever delivered more than US T bills. I'd much rather own everything as I have no idea about the future :)
So by your own assertion if you cannot compare the market due to the constituents then neither can you go back and suggest that the growth and returns over 100years are in any way projectable (if that's a word) going forward - so I think that statement may be self defeating ?
Correct - you can never know what future returns will be. There are no guarantees at all. However you do need to do something, as inflation eats away at your money. You can either own assets that produce cash flows..or hide it under the bed.
Listening to this whip o do my weekly deposit to vuag
I think valuation (this time is different)in current age is hard to measure what expensive and what is not ,today everyone investing in us markets and it is a huge factor for current valuation and there's some intangible assets with certain business that are hard to valuate
Only a liquidy crisis will shake the water
Hi Toby, a very important and timely video to keep us tuned in to the end goal. Very interesting about the S and P 500 and its influence from outside America. Always love to hear about Warren Buffet. Thank you.
exactly... the "buffett indicator" is total BS, when most of the revenue of the largest companies are not even from the US, so why have the presumption that the market should only be judged by the average income of ordinary Americans. P/E is different because the majority in value of the companies are now tech companies, which have always had a higher P/E to begin with. Meanwhile, banks and energy have always had the lowest.
Toby, you are only one of 2 channels i follow regarding this topic - well done and thank you for your content 👍🏻
That tech is a large part of the index should be a negative as they are comparatively easy to overtake. Those who think differently are presumably on their dial up using freeserve or AOL looking up friends reunited or entering data in their Lotus spreadsheet on their IBM PC
Sure tech will be a part of the future but there is no reason why the existing tech firms could not follow nokia from shooting star to hitting the ground hard
Sorry, what?? I'm guessing your in your 70s. Tech will be 'part' of the future 🤣
@@nev-dd9jq err your problem with this is? Add up your spending by category and tech is what sixth? after housing, groceries, transport, utilities, entertainment and possibly then tech. Maybe your an outlier and its up to third your still spending most on non tech items so tech is only part of the present and future
@@Mike-lb1hx you really don't get this do you? Take a look at the quarterly profits of the company that owns the platform I'm typing this message on 🤣You've heard of Google right? Or are you still using Freeserve and AOL 🤣 Do you still have dial-up and send faxes? 🤣
@@nev-dd9jq Have you heard of Apple, it trades on a PE of 37, that requires a significant growth expectation and history but its provided flat revenue and earnings for 3-4 years. It has no new killer products and its existing products will come under pricing pressure as the lead over competitors declines. It is unlikely to be here in 37 years, the time to break even if there's no growth. It is vastly over valued and looks like Nokia did.
Or you could believe its different this time just like those who lost their shirts did in the past
There will always be winners and losers across the markets, as the variety of companies and sectors is so wide. However, I would say don’t be fooled if someone says it’s different this time around, or that P/E ratios are now going to remain higher for good going forward. We heard the exact same thing in the first tech bubble around 2000, and those people were proved completely wrong. As others have mentioned, the mistake is people keep talking about the S&P 500 and then discuss just one of the very successful tech giants. The index represents all 500 companies, albeit with many representing virtually no weighting. So when you discuss whether expensive or cheap you need to think of all the companies, and is the economic environment good for all of them to continue to outperform their previous history, as they need to do so to justify the current higher P/E ratios versus average. My instinct, with Trump starting potential tariff wars, and a anti US product backlash in multiple countries (see German sales of Tesla cars slumping) is that all is not perfect, and therefore the risk level that conditions are going to get tougher is higher, which will cause a decent pullback. A good indicator that others in the markets start to agree with this view is the Vix. If this starts to climb, especially after key data releases, I would probably look to take profits, especially from the mag 7. However, as others have mentioned, stripping them out of the stats, and the rest of the index is still above historical average, but not too much. So I think this should give a little comfort. I want to stay invested, so one I have looked to slightly reduce risk is to move away from US Growth into US value, so I am still in the game, but have reduced exposure to those highest valuations and instead gone more into those traditional companies, who ultimately are still brilliant global companies, but who are not expensive versus their historical levels.
I used to think it was just about buying dip in market, but I didn’t realize there are strategies for managing risk and actually making a profit. Now I feel kinda stuck since I’m not seeing any gains in my portfolio. Is there any recommendations on what I should consider? I’d really appreciate it!
The answer is DCA.
Now, what's the question..? 😅
What’s the meaning of life? 🤣
TBF, the answer is " lump sum investment ".
gonna start buying again as soon as I get a new ISA allowance. roll on April
Not long now!
Channel that promotes investing says extremely bad fundamentals are actually good and you should keep investing.
@@MrDoctorDave what are you on about? Where are you getting extremely bad fundamentals from? You know better though I’m sure you can time the market and you’re a genius right? 🤣. Thank you for allowing me to buy the market I’m grateful for your amazing insight/
DCA 15% of my income every month into s&p and will continue to for the next 15 years. Got to laugh at people trying to time the future.
Maths not math* you’re not American
True ! The American podcasts contain a lot of etfs only Americans can buy..stick to your country of origin and don’t worry about the others I say
Amazing video as always!!! Keep it up Toby!!
If the market crashes, it's just an opportunity to buy cheaper, something a long-term investor will gladly take. Every crash bounced back. Just sit tight and wait for the recovery, and your money will exponentially grow. No matter what, every Monday money goes into my efts
we only recovered the original growth rates of before 2008 now, so in fact it does effect you
How long does it take to recover?
Quantitative Easing during Covid has changed all the indicators. Share price inflation in the last 2 years is just where the newly created money has settled.
I wouldn’t consider higher PE ratios or the Buffet indicator as anything to worry about. It’s no coincidence that all other asset prices are also at all time highs right now.
7:30 categorically incorrect. GDP = C+I+G+(X-M). With X being exports, so GDP for an american listed company will include its income generated in other countries. However, retained income in overseas subsidaries may not be fully included in export figures.
GDP does not take into account profits earned in a nation by overseas companies that are remitted back to foreign investors :) - that is the whole point . I literally said for any services sold outside of the country :)
Agreed
Warren Buffet is a value investor - if the market is overvalued then maybe he is doing what he has always done looking for good value investments - no ?
Sure maybe - but he's not doing it because he thinks he can time the market. If this were the case, then just sell all stocks and wait. Nobody can time the market :)
Started investing literally last Friday, was wondering if it was a mistake, thanks for the vid.
It’s always a good time to start - if you’re a long term investor none of this matters 😀
Comment from the future: Dump It.
lol - ok cool so im guessing you invest in gold and hide in a bunker right? or just always jump in and out of the market :P
What a well thought out comprehensive video with very relevant information that no other tuber has provided. Good stuff Toby.
Much appreciated!
best lesson ive learned is that no one can tell what is going to happen. have faith that it will be fine, and in case it crashes, have a long term goal as it will most likely go back up in a year or two
I always trust banks, they have billions and best PHD's in the world
for example end of 2023 morgan chase predicted a negative year for sp500 and indeed the end result was ONLY a positive 24%
so as we can see they are super precies (ok few points mistake, can happen to anybody innit!)
so whatever morgan chase tells me to do i do opposite lmao
does this after those who invest for like 2 decades
Long term investors should not pay any attention or change their investing because of this IMO
thanks for the feedback im from africa im 22 years old but i dont have the cash to start right now but your channel has really helped me so much will choose to do long term which compounds
Without watching, Toby would say that no matter how much the stock market increases or decreases, he would continue to invest. 😅
No way! I’m selling everything and moving to the beach! 🥳
@@TobyNewbatt😂
And he would invest in an All World fund for some reason
I believe as important as PE ratios, Warren buffet indicator, balance sheets are important for measuring the value of the market.
I believe time is the most important factor.
For me I’m 35! So the market won’t be over valued to me till I’m ready to cash out.
Someone a bit older and near retirement may calculate their valuation metrics differently.
That being said try and retire as close to 50 as possible. (No such thing as a healthy 60 year old)
I am a healthy 60 year old. 😂
@@lawrencer8673it’s a tongue in cheek comment!!
You can be healthy all the way up to over 100.
Life expectancy has risen dramatically.
People are living into their late 90s.
60 is the new 40
Lol
Over the last 20 years you say that Berkshire returned 467%.
Thats wrong. It's 757%.
Forgive me it's 2010 until now - it's 15 years not 20!
My figures still stand. I was limited by the history of the S&P 500 ETF I was using for total returns :)
@TobyNewbatt Use the actual index as opposed to an ETF - you can compare multiple companies and indices on Yahoo Finance easily.
Very cool video. Thanks.
I recommend everyone to find the book titled Uncommon Paths to Wealth from Cryptic Lore It changed my life
Overvalued a little for sure, good day to be investing into a global equity fund instead of just the US. Currently portfolio is 30% bitcoin, 70% VWRP. DCA daily into Bitcoin, weekly into VWRP
Key is to invest in assets that try and mitigate currency debasement
Sp500 takes up 60% of vwrl
@ 65% yeah, doesn’t mean you want to be 100% exposed to US companies only
@@joesetterfield9684did you even watch the video? US LISTED companies yes, but the largest companies operate globally. That true of any exchange's largest companies.
Really cant compare S&p 500 to other markets based on valuation
Have you done a video on micro strategy or strategy B as it is now.
Bitcoin not a theme on here.
Hi, and thanks for your awesome contents as always. Could you please make a video about “ Artificial Intelligence & Robotics etfs” as well, which one to buy and so cheers. Keep on doing the good work.
maybe in the future thank you!
You should have many more subscribers. A real financial education 🫡
Thank you :)
I would never bet against the good old US economy.
This analysis was fantastic. Thanks so much, Toby!
Glad you enjoyed it!
Im buying gold
Always the Pub option whether its going up or down 😂😂
Haha - there’s champagne or lager no matter what 🤣
Keep on drinking?
Revolut or Trading212? What do you suggest?
What for? If you are asking about investing it's not even close, T212 is far more mature.
@TobyNewbatt I ask about safety for long term investments.
Historic data is a wonderful thing but really you cannot predict.
Thank you Toby, like you say impossible to predict really. I'm more concerned with the tariffs Trump is imposing and what impact that may have on the market. I'm getting on a bit so this probably concerns me more than you.
Great insight Toby.
Thanks, always learn something new from your contents!
Glad to hear it!
They live under water
I have been watching videos like this for the last five years.
I’m all in for XAI502K baaabbbyyyy!! Really though, I’m so excited to see what’s coming
Toby, the voice of reason 💪💪👍
Tulip bubbles, Klondike minerals, Shit coin, your making a good living
Toby, let me introduce you to: the Kondratiev wave theorem of super cycles. That's my bet, and I'm not the only one thinking this. Ray Dalio said in Davos that stocks have "under-discounted" AI technology, and i agree with Ray.
Hi Toby tehe! 🎉
@danieladams7919 Hi Daniel tehe! 🎉
Hehehehe
Warren Buffet is a wise old fox.
I am sure that XAI502K will go 100x just like you said
Is there a best day, best time of the week if you choose to DCA? Is it better just to automate it so you buy in when the market opens at 8:30am? Is weekly or monthly better? Sorry for lots of questions😊 ..Great Channel 👏
Equity in businesses is rarely found anywhere near trading centers. Could a number on a screen really cause so much stress?
SOLANA DOWN, XAI502K UP 🏆
XAI502K will be a leader this bull run
200k on XAI502K, Holding forever
very good sensible and balanced.
What is price prediction of $XAI502K
Why does no one talk about number of people investing? Price is derived by supply and demand and given investing has become mainstream, that would suggest to me that p/e ratios will rise. Having said that, right now, the s&p does look toppy. The P/E already accounts for margin so not sure why a higher margin would necessarily attract a higher p/e unless the market thought it would continue to grow exponentially.
I would love a 60% crash I would fill my boots.
Didn't we have this discussion back in 2023?
We could have the same discussion every single year :)
I wonder if Buffett is buying bonds as the yield is comparatively high and the risk lower than shares at the moment. If interest rates are cut the value of the bonds will increase too.
@@jdthompson123 his cash is in short term treasuries - I suspect it’s there for his successors so they have a war chest to play with
first, thanks for the video and more somber take.
buffet actually addressed the reason why they sold apple shares, which has to do with him thinking that the taxes will increase, so he preferred to lock in profits (and taxes). 2024 AGM.
Thank you! So nothing to do with him expecting a massive crash then...people still holding on to this line
Hi Toby, great video once again!
Could you do a video on best strategies to liquidate stocks once you e reached retirement age and want to start spending your investments and avoid as much tax as possible. I’ve seen some stuff on buy borrow die is that a strategy available to us in the UK, would you recommend this opposed to selling portfolio?
Thanks Toby
I wouldn't mind a crash before the new tax year
XAI502K pump pump pumping
Ah shaddap, the s&p500 is hitting new highs more often than not