Record stock market valuations mask reliance on temporary profit catalysts

The S&P 500 recently hit record highs while forward P/E ratios have unexpectedly contracted — from above 23 in October to roughly 22 — driven less by broad-based valuation improvement than by outsized earnings revisions in a few sectors. Analysts say the apparent “cheapness” stems mainly from AI infrastructure winners and energy-related gains tied to the Iran conflict. Citigroup notes PEG ratios for the eight largest tech/AI stocks are the most attractive since 2013, while cyclical names like Micron (MU.OQ) have seen large, likely temporary, earnings upgrades. The piece warns markets may re-rate quickly if data‑centre spending cools or geopolitical energy shocks ease, underlining a mixed risk profile for the S&P 500’s rally.