A 4% interest savings account could be better value than the S&P 500

A 4% interest savings account has an equivalent P/E of 25

The S&P 500 forward P/E is around 25

The historic return on the S&P 500 has been about 10% per year. But things are different: P/E is now double the historical average. Shiller CAPE is more than double the historical average and is almost at the 2000 bubble peak.

This would be fine if the US economy was growing fast but it's not. Growth is expected to bearound 1-2% above inflation.. Over periods of 15 to 20 years, the correlation between GDP and the S&P 500 has an R² of around 0.95. This is linked to the Buffet Indicator which itself suggests the stock market is more overpriced than ever before.

Based on these indicators and historical patterns, the S&P 500 is likely to grow at less than 4% a year over the next five years.

Current share prices are very speculative based on projections of rapidly increasing revenue and profit margins for the biggest companies due to AI. That's a big risk considering these projections are already priced in. Companies have an incentive to overstate and oversell the AI future. With expectations so high, people should prepare to be disappointed.