Understanding Market Valuations

Recent surveys indicate that 91% of fund managers believe U.S. stocks are overvalued, while emerging markets are considered undervalued. Historically, market pullbacks often occur when investors are least expecting them, rather than when caution is high. Significant changes in market composition have contributed to elevated valuation multiples. Technology companies now represent approximately 25% or more of the S&P 500, compared to just 10% in the 1970s. Technology companies typically experience faster growth and trade at higher price-to-earnings multiples, while sectors such as consumer staples, energy, and utilities have declined in index representation. This structural shift helps explain why elevated market multiples have persisted for longer periods in the current market environment. An important metric for evaluating market health is the performance of consumer discretionary stocks relative to consumer staples. In a strong bull market, discretionary spending should rise faster than staples, reflecting higher consumer confidence and excess income. Despite recent minor pullbacks, this relationship has remained strong, providing insight into overall market valuation trends.

The Role of Dividends in Investing

Dividends continue to be one of the most efficient ways for companies to return capital to shareholders and are a significant contributor to total investment returns. Out of the 503 companies in the S&P 500, 407 reported distributing cash dividends to shareholders as of October 7, 2025. Over the long term, dividends have accounted for 36.7% of total returns in the S&P 500 since 1928, highlighting their importance in wealth accumulation. Dividend payments also serve as indicators of corporate health. Through the end of September 2025, only seven dividend cuts and one suspension were reported, compared with 11 cuts and two suspensions in the same period the previous year. Dividends can also act as an effective hedge against inflation: while the Consumer Price Index increased by 35.9% over the past decade, total dividends paid by index stocks grew by 80.9% during the same period.

Greg Powell, CIMA®

President and CEO

Wealth Consultant

Email Greg Powell here

Bobby Norman, CFP®, AIF®, CEPA®

Managing Director

Wealth Consultant

Email Bobby Norman here

Trey Booth, CFA®, AIF®

Chief Investment Officer

Wealth Consultant

Email Trey Booth here

Ty Miller, AIF®

Vice President

Wealth Consultant

Email Ty Miller here

Fi Plan Partners is an independent investment firm in Birmingham, AL, with a team of professionals serving clients across the nation through financial planning, wealth management and business consulting. The team at Fi Plan Partners creates strategies in the best interest of their clients using fee based investing.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.

Economic forecasts set forth in this presentation may not develop as predicted.

No strategy can ensure success or protect against a loss.

Stock investing involves risk including potential loss of principal.

Securities and advisory services offered through LPL Financial, Member FINRA/SIPC and a registered investment advisor.

The post Market Overvalued? Not so fast… first appeared on Fi Plan Partners.