Is the stock market overvalued right now? (10 26 25)

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When people say the stock market is “expensive” or “overvalued,” what does that actually mean? Today, we break down what “overvalued” really means for stocks, show how current valuations compare with historical norms, and explore whether today’s pricey market might still be justified. Read on for what that could mean for your portfolio and future return expectations.

Here’s what we’re covering in today’s Clark Smart Investing newsletter:

• Is the stock market overvalued right now?

• What age are Americans actually starting to collect Social Security?

• The real secret to wealth isn't your IQ (it's actually these habits)

• Money nerd alert: What is factor investing?

• Q&A: Is there a way to balance investing and enjoying my disposable income?

• Smart money move of the week

💵 Is the Stock Market Overvalued Right Now?

When people say the stock market is “expensive” or “overvalued,” what does that actually mean?

Over the past 100 years, the stock market (measured by the S&P 500) has typically traded at around 15-17x earnings. That’s been the long-term average, with some variation above and below depending on economic conditions.

In October 2025, the S&P 500’s P/E ratio is 25x, but it hit 30x last month.

That means investors today are paying nearly double what they’ve historically paid for the same dollar of corporate earnings. It’s not the highest it’s ever been — during the late 1990s tech bubble, it briefly exceeded 40x — but it’s definitely expensive by historical standards.

Here’s where it gets more nuanced. Just because something costs more than it used to doesn’t automatically mean the price is wrong. There might be legitimate reasons why today’s businesses command higher valuations than businesses did decades ago.

The full article breaks down what people really mean when they say the stock market is “overvalued” — and why it matters for your money. It looks at key measures like the P/E ratio and shows how today’s market stacks up against history. You’ll also learn why some experts think higher prices might make sense right now and what that could mean for future returns. Finally, it shares practical advice on how to keep investing smartly, even when stocks seem pricey.

✅ Poll: What’s Your Take?

Last Week’s Poll Results

We asked: “Do you currently hold any individual stocks in your investment portfolio?” Here’s how you answered:

• No, I only use mutual funds, ETFs, and retirement funds: 36.1%

• Yes, a small portion (1% - 15% of my total investments): 33.4%

• Yes, a significant portion (More than 15% of my total investments): 30.5%

📚️ Recommended Reading

💬 Ask an Advisor

In this recurring Q&A, we share questions that have been answered by Clark Howard or Wes Moss on the podcast. Submit your question today!

McKay in Georgia asks: I want to invest our disposable income in some way to balance enjoying it now but also have it grow so that it bumps up our baseline lifestyle before retirement. I have a very steady paycheck and love my job, but I don’t expect significant raises. How can we do this?

Wes Moss says: Since your income is steady and you don’t expect big raises, the key is to “trick” yourself into saving more without feeling the pinch. One of the best ways to do that is by using your 401(k)’s automatic escalation feature — many plans now include this option thanks to the SECURE 2.0 Act. You can set it to increase your contribution by about 1% each year, and you’ll probably hardly notice the difference. Over time, that gradual bump could take you from saving 8% to 12–14% of your income without ever feeling a big hit to your paycheck. You’re already ahead of the game because you enjoy your job — that kind of satisfaction makes it easier to stick with a smart, consistent savings plan for the long term.

💸 Money Tip of the Week

☎️ Need Money Help?

The Team Clark Consumer Action Center is a free helpline that can help you navigate your money questions. Call 636-492-5275. Visit clark.com/cac for more information.

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