Michael Bolliger, Chief Investment Officer Switzerland and Global Emerging Markets, UBS Global Wealth Management:

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The S&P 500 recently reached new record highs and is up more than 12 percent year-to-date, driven by solid earnings – especially in AI-linked tech – and the Fed’s latest rate cut, with more expected.

Valuations are increasingly questioned, yet they remain broadly supported. The forward P/E (22.5) and Shiller P/E (37.9) are near historic peaks, but there are few signs of a bubble. Market sentiment is far from euphoric, and institutional investors remain cautious.

«A look back at 2000 is helpful: back then, major tech firms traded at an average P/E of 82 – today the ‹Magnificent Seven› sit around 28.»

A look back at 2000 is helpful: Back then, major tech companies traded at an average P/E of 82 – today the «Magnificent Seven» sit around 28. Leverage is also much lower than during the dot-com peak, and earnings growth far more robust.

Still, the deep interconnectedness of tech firms within AI, their profitability, and their leverage warrant scrutiny. Should technological momentum slow, sentiment may shift. Underweight investors can increase equity exposure, especially on pullbacks.

Reverse convertibles also look attractive for long-term investors willing to tolerate short-term downside. Diversified properly, they offer solid income and tend to convert into selected shares that typically recover over time.

Read next: Markus Alefelder, Senior Investment Advisor, Neue Bank.