Even for investors who’ve weathered wild swings, the last six months have been a test of nerves. Call it the MAGA effect.
The day after Donald Trump won the U.S. presidential election, the stock market exploded. The S&P 500, Nasdaq, and Dow Jones Industrial Average all hit record highs, driven by optimism over Trump’s promises of tax cuts and deregulation.
Bitcoin followed suit, blowing past $100,000 within a month, as crypto bulls welcomed the arrival of a friendly administration in the White House.
But the post-election party didn’t last long. By mid-November, markets started to stumble as traders priced in the risks of Trump’s economic agenda.
It didn't take long before those risks materialized. After Trump unveiled his “Liberation Day” reciprocal tariffs in April, the S&P 500 dropped as much as 17.8% on the year. The Nasdaq cratered 23.4%.
Markets rebounded after Trump paused the most aggressive tariffs, and Beijing backed off escalation. Now, the Nasdaq sits just 2.7% off its highs, while the S&P 500 is down about 2% from its peak.
Ed Yardeni of Yardeni Research sees more upside. He told Investor's Business Daily the S&P 500 could reach 6,500 by year-end, up from 5,977 last week.
But corporate American insiders beg to disagree.
Last week, Bloomberg reported that executives are selling shares at the fastest pace since the November election. Between June 1 and 11, 778 insiders sold stock while only 200 bought.
"The absence of demand from C-suite executives — the people who arguably know their companies best — may show a lack of conviction that the risk-on momentum that's pushed stocks up 21% in a little over two months has more room to go," Bloomberg’s Joel Leon wrote.
Buffett’s red flag: The market cap-to-GDP ratio hits 198%
One of Warren Buffett’s favorite tools to gauge market valuation is flashing red.
Known as the “Buffett Indicator,” this metric compares the total market cap of U.S. stocks to U.S. GDP. Buffett once called it “probably the best single measure” of how expensive the market is.
Historically, the Buffett Indicator ranges between 75% and 90%. Anything over 100% is considered overvalued.
Last November, it spiked to 240%, a record high. As of June 5, it had pulled back to 198%, which is still among the most expensive readings in history.
“The Warren Buffett Indicator jumps to 198%, the second most expensive valuation of all-time,” Investing.com analyst Jesse Cohen posted on X. “Do valuations even matter in 2025?”
🚨The Warren Buffett Indicator jumps to 198%, the second most expensive valuation of all-time.
undefined Jesse Cohen (@JesseCohenInv) June 5, 2025
Do valuations even matter in 2025? pic.twitter.com/7ICSb4ybzJ
For comparison, the Buffett Indicator hit 175% during the dot-com peak in March 2000, just before that bubble burst.
Seven stocks are driving the rally
Much of the market’s surge is being powered by just a few names. The “Magnificent Seven” — led by Apple, Nvidia, and Microsoft — now command a combined market cap of $17.4 trillion as of June 10.
That’s distorting valuations and making it harder to find bargains, even if the overall market looks strong on the surface.
A February survey from Schwab found that two-thirds of traders already believed the market was overpriced, with mega-cap tech and AI stocks singled out as the most crowded trades.
But for investors looking beyond the big names, there are still opportunities.
“The market is overvalued, but that's never a good reason necessarily to sell,” Danny Moses of Moses Venture told CNBC. “There are too few stocks controlling the market — just like there are too few citizens controlling the economy.”
Morningstar’s Dan Kemp agrees, noting that while U.S. large-cap growth stocks are trading 8.2% above fair value, small-value stocks are currently 14.4% undervalued.
“This suggests opportunities for patient investors,” Kemp wrote.
Veteran market watcher Mark Hulbert believes value may lie beyond the S&P 500 and beyond U.S. borders.
According to Barclays Bank data, Poland’s market has a CAPE ratio of just 9.22, the second-lowest among 26 global markets. The U.S. CAPE ratio, by contrast, sits at 36.7, one of the highest readings.
The iShares MSCI Poland ETF (EPOL) has returned 44.6% year-to-date through June 4, nearly seven times the 6.6% gain of the Vanguard Total World Stock ETF. The S&P 500 is up just 2.1% in comparison.
“Since the U.S. has the second-most overvalued stock market next to India,” Hulbert wrote, “one way to get exposure to more undervalued markets would be to invest in non-U.S. equities.”
Your email address will not be published. Required fields are markedmarked