Feb 22, 2025

I recently learned that the stock market is currently considered expensive, with most S&P 500 valuation metrics above historical averages. However, Bank of America suggests that there is a bullish case that has not been fully priced in yet. Despite the high valuations, investors are still buying the dip, keeping the market close to its record high. Bank of America also points out that heavily regulated sectors have not fully rallied yet, and there is optimism around the potential for deregulation to boost certain industries.

Bank of America highlights the industries that could benefit the most from deregulation, including consumer sectors, large banks, commodities sectors, transports, and capital goods. These sectors are currently trading at discounts compared to less regulated sectors like technology, media, telecoms, and consumer & professional services. The inverse relationship between the number of regulations and forward P/E ratios suggests that less regulated sectors tend to be more expensive.

Additionally, Bank of America notes the significant contrast between technology and financial sectors since 2008. Tech has enjoyed growth and lighter regulations, while financials faced increased regulations and focused on repairing balance sheets. The potential for deregulation could lead to a relative re-rating in financials compared to a de-rating in tech, based on historical trends. U.S. stock-index futures are higher, benchmark Treasury yields are falling, and key asset performances show mixed results across different markets.

In other news, Japan is reportedly seeking an investment from Tesla’s Elon Musk in Nissan, and there have been notable developments in the M&A space, including Celsius agreeing to acquire Alani Nu for $1.8 billion. Venture capital deals and fundraising activities are also significant, with companies raising substantial amounts for various purposes. Renewable energy sources accounted for a significant portion of new power generating capacity in the U.S. last year, driven by solar installations and battery projects reaching record levels.

Stay Well!