PANews October 18 news, according to Zhitong Finance, Citi analysts believe that AI-driven earnings growth and changes in investor ownership structure are weakening the traditional link between U.S. Treasury yields and U.S. equity valuations, and that rising interest rates may have a greater impact on economic growth expectations than on stock valuations. The institution's valuation model shows that the fair price-to-earnings ratio range for the S&P 500 is 17.1 to 22.1 times, while the current price-to-earnings ratio has reached 22.4 times, reflecting relatively optimistic market sentiment.
Citi pointed out that since the end of August, cyclical stocks and defensive stocks have been dragged down by rising interest rates, but growth stocks have remained relatively resilient due to support from AI earnings expectations. In addition, the recent rise in U.S. Treasury yields may partly stem from an increase in government bond supply rather than economic overheating. The shift of the pension system toward defined contribution plans, younger investors' preference for high equity allocations, and continued inflows of overseas capital are also supporting U.S. equity valuations. However, Citi believes that the key issue currently facing the market is what additional funds will be able to continue driving the stock market higher in the future.