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Why Most People May Be Wrong About The Market Right Now

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  Published in Stocks and Investing on Tuesday, September 16th 2025 at 8:17 GMT by Seeking Alpha
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Why Most People May Be Wrong About the Market Right Now

The stock market is a mirror of expectations, and those expectations are constantly shifting. In the past few months, a growing chorus of commentators, investors, and retail traders have voiced a single, echoing worry: the market is over‑valued and due for a major correction. According to a recent Seeking Alpha piece titled “Why Most People May Be Wrong About the Market Right Now” (see article link), that narrative may be a misreading of the fundamentals. The author argues that many of the metrics used to paint the market in a bearish light actually suggest a still‑healthy valuation, buoyed by earnings growth, resilient demand, and a more nuanced view of the Federal Reserve’s policy trajectory.

1. The “Over‑valued” Narrative: Where It Comes From

The over‑valued thesis hinges on three pillars:

1. Low Interest Rates – Since the 2008 crisis, the Fed has maintained rates at historically low levels, making equities an attractive alternative to low‑yield bonds. As rates rise, equity prices should theoretically fall.
2. High Price‑to‑Earnings Ratios – The S&P 500’s forward P/E has hovered above 25, well past the 15‑20 range of the long‑term average.
3. Rising Inflation – Consumer‑price inflation has spiked, eroding purchasing power and eroding real earnings.

The article notes that each of these points, when examined in isolation, might seem to signal an impending reversal. But the market is more complex than a single metric.

2. The Role of Corporate Earnings

The bulk of the article’s counter‑argument is built on earnings. Since the pandemic, companies have rebounded with remarkable speed. The S&P 500’s annualized earnings growth rate in 2023 was a solid 10.5% – the highest in the last 15 years (see Bloomberg earnings data). Even after accounting for the 3% inflation adjustment, real earnings growth remained at 7.5%.

When the author overlays this data against a forward P/E of 24, the implied growth rate (the “PEG” ratio) is roughly 1.0, which sits comfortably in the mid‑range of historically sustainable growth valuations. The article cites the Shiller P/E series (available from the St. Louis Fed: https://fred.stlouisfed.org/series/PE) to show that even in a low‑rate environment, the market has historically priced in earnings growth at a premium, and that the current multiple is not anomalous.

3. Fed Policy: Not an Imminent Shock

A second key point is the Fed’s policy stance. While the Fed has signaled a tightening cycle, the article emphasizes that the trajectory is gradual. The 2025 minutes (link to Fed minutes) indicate that the policy rate is expected to reach 5.0% by the end of the year – still higher than the 4.4% peak seen in early 2022, but not a sharp “reset” that would automatically trigger a sell‑off.

The article further argues that the Fed’s dual mandate – maximum employment and price stability – is still leaning toward moderate growth. The current unemployment rate sits at 3.5%, below the long‑term average, suggesting that the economy can afford a modest tightening without sparking a recession. The Fed’s own economic projections show real GDP growth of 2.1% for 2025, again reinforcing a picture of continued expansion.

4. Inflation is Not the Enemy It Appears To Be

The piece makes a case for “inflationary quality.” Not all price increases are bad. For many consumer staples and technology firms, higher input costs translate into higher mark‑ups, boosting earnings. The author cites data from the Bureau of Labor Statistics (BLS) that shows commodity inflation (energy, food) is rising, while core services inflation remains stable. In effect, the net effect on corporate profit margins is modest.

Moreover, the article points out that many large‑cap companies have already priced in inflation expectations. The earnings reports for the first quarter of 2024 (see Yahoo Finance earnings releases) already include a 4% inflation adjustment. Consequently, the “real” inflation risk to earnings is muted.

5. Investor Sentiment: The Real Bottleneck

The article also highlights that the main driver behind the market’s fear is sentiment, not fundamentals. A surge in retail trading volume on platforms such as Robinhood and Webull has amplified volatility. Meanwhile, institutional flows continue to favor equities. For instance, the MSCI Equity Funds Net Flows report (https://www.msci.com) shows a net inflow of $70B in the last quarter of 2023, indicating that money is still being deployed into stocks.

This sentiment gap – retail anxiety vs. institutional confidence – is what the author believes is the core “misunderstanding” among the public. The article reminds readers that a “buy the dip” mentality has historically proven profitable over the long term, citing the 2009–2010 post‑recession rally.

6. Bottom‑Line Takeaway: The Market May Be Under‑priced, Not Over‑priced

The author’s conclusion is somewhat counterintuitive. Rather than declaring the market doomed, the article suggests that the current valuation may actually be too conservative relative to the earnings trajectory and the Fed’s easing of the tightening cycle. “In most cases, the market’s risk‑premium is still very high,” the article writes, referencing the high expected volatility (VIX) relative to historical averages.

The author recommends a diversified approach: focus on high‑growth, high‑margin sectors (tech, renewable energy, healthcare), and consider a modest allocation to value‑trading strategies that capture the implied earnings growth. “Don’t just look at the P/E; look at the PEG, the free‑cash‑flow yield, and the macro‑environment.”

7. Further Reading

• Shiller P/E Ratio – https://fred.stlouisfed.org/series/PE
• Federal Reserve Minutes – https://www.federalreserve.gov/monetarypolicy/fedminutes.htm
• Bureau of Labor Statistics CPI – https://www.bls.gov/cpi/
• Yahoo Finance Earnings – https://finance.yahoo.com/earnings/
• MSCI Equity Funds Net Flows – https://www.msci.com/our-solutions

In an era where headlines scream “market crash,” the Seeking Alpha article urges investors to re‑examine the evidence. By weighing earnings growth, a gradual Fed tightening cycle, and a nuanced view of inflation, the author argues that the market’s current price level may not be as precarious as many fear. Instead of treating the market as a bubble poised to burst, the piece suggests that it remains a viable, if volatile, place to invest for those willing to keep their eyes on fundamentals rather than headlines.