The S&P 500 is not expensive based on its Forward P/ES&P 500SPCFD:SPXSwissquoteThe second-quarter 2026 earnings season will begin this July, and once again the technology sector and the semiconductor industry are expected to be the main focus. The S&P 500 index continues to trade close to its all-time high, and I invite you to review the analysis below to discover the technical and fundamental upside potential for the S&P 500 through the end of the year. With that in mind, one question arises again at the beginning of July, ahead of the quarterly earnings season: is the S&P 500 too expensive from a valuation perspective? The stock market is always forward-looking, which is why the Forward Price-to-Earnings ratio (Forward P/E) is the most relevant valuation multiple for determining whether the S&P 500 is overvalued or still relatively inexpensive. The good news is that the Forward P/E currently stands at its five-year average, meaning that the S&P 500 is not overvalued relative to its expected earnings. Let us first recall what the Forward P/E represents. The Forward Price-to-Earnings ratio measures the relationship between the current level of the index and the earnings per share expected over the next twelve months. Unlike the traditional P/E ratio, which is based on historical earnings, the Forward P/E reflects analysts' earnings expectations and therefore provides an excellent indicator of the market's future valuation. The chart below (Source: FactSet) illustrates the evolution of the S&P 500 Forward P/E. Despite reaching new all-time highs, the S&P 500 is not expensive relative to its expected earnings over the next twelve months. The Forward P/E currently stands at its five-year average and remains well below its historical peak of 23.5. As shown in the chart above, the S&P 500 Forward P/E is currently trading at around 20 times expected earnings, a level that is almost identical to its average over the past five years. While it remains slightly above its ten-year average of approximately 19 times earnings, this premium is limited and does not indicate excessive market overvaluation. This assessment is all the more important as earnings expectations for U.S. companies continue to be revised upward, particularly in sectors related to artificial intelligence, digital infrastructure, and semiconductors. If quarterly earnings reports confirm these expectations, earnings growth could absorb part of the recent increase in stock prices, allowing the Forward P/E to remain at reasonable levels. In other words, the U.S. equity market remains demanding, but it is not excessively valued considering the expected earnings growth. The coming weeks will therefore be decisive: earnings results that exceed expectations would reinforce the scenario of a continued bullish trend in the S&P 500 through year-end, whereas disappointing earnings or weaker forward guidance could trigger a consolidation phase without necessarily calling the underlying uptrend into question, provided that earnings expectations remain solid. DISCLAIMER: This content is intended for individuals who are familiar with financial markets and instruments and is for information purposes only. The presented idea (including market commentary, market data and observations) is not a work product of any research department of Swissquote or its affiliates. This material is intended to highlight market action and does not constitute investment, legal or tax advice. If you are a retail investor or lack experience in trading complex financial products, it is advisable to seek professional advice from licensed advisor before making any financial decisions. 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