When traders are feeling good, the S&P 500 can take off like a rocket. This was actually the case in 2024 when the US benchmark share index surged 23%.

It wasn’t simply the tech giants like Nvidia, Tesla, and Amazon that soared in worth. Shares throughout the S&P 500 ripped increased on hopes of sustained rate of interest cuts that might enhance progress and, by extension, company profitability.

However what shoots increased when confidence is up can crash to earth when optimism wanes. This has been the story thus far in 2025, with traders questioning the outlook (and the lofty valuations) of final 12 months’s risers.

In accordance with analyst Kathleen Brooks of XTB, “momentum and progress had been highly effective drivers of the S&P 500’s rally in 2024 [but] they’ve now reversed“.

This change has seen “value shares outperforming” progress and momentum inventory in latest days, Brooks famous. She added that “it’s too early to know if it is a pattern, however it’s undoubtedly one thing to look at“.

Rising gloom

US shares are promoting off for a wide range of causes, together with:

• Indicators of cussed inflation which will restrict international rate of interest cuts.
• Robust US financial information that might mood price cuts by the Federal Reserve particularly.
• Contemporary fears over China’s economic system.
• Worries over instant new commerce tariffs from US President Trump.

A few of these considerations aren’t new. Nonetheless, the massive valuations on S&P 500 shares are making traders reassess whether or not present inventory costs precisely replicate the dangers and challenges forward.

The forward-looking price-to-earnings (P/E) ratio on S&P 500 shares is at present an unlimited 29.5 occasions.

On this local weather, it’s maybe no shock to see demand for US worth shares choosing up. Low valuations depart a large margin of security in case of earnings shocks associated to macroeconomic occasions.

A price share to think about

As a long-term investor, my bullish view on the S&P 500 stays in tact. Historical past reveals that share costs all the time rebound following crises. And I’m anticipating the US inventory market to proceed its decades-long ascent, pushed by the continued technological innovation and the big home economic system.

Nonetheless, I can take steps to bolster and shield my portfolio by including some worth shares. Alphabet (NASDAQ:GOOG) is one I feel is price severe consideration immediately.

For 2025, the Google and YouTube proprietor trades on a ahead P/E ratio of 21.8 occasions. That is comfortably under the S&P 500 common of close to 30 occasions.

It’s additionally a ways underneath a median of 47 occasions for the index’s broader data know-how sector.

Alphabet’s cyclical operations depart it weak throughout financial downturns. It additionally faces growing competitors from different search engines like google and yahoo and social media suppliers.

Nonetheless, the tech large additionally has appreciable progress potential because the digital economic system continues increasing. I’m significantly taken by its progress within the subject of synthetic intelligence (AI) and its potential in different progress sectors like cloud computing and autonomous autos.

Within the present local weather, I feel shopping for low-cost US shares like it is a nice thought to think about.