The S & P 500 might seem expensive at the moment, but this shouldn’t spook investors, according to Bank of America. “The one bear case that I hear a lot that I want to try to debunk is just the idea that the market is too expensive … the market today is such a different animal” compared to previous decades, equity strategist Savita Subramanian said on CNBC’s “Squawk Box” on Wednesday. “Nobody is talking about the fact that we keep revising GDP higher and earnings are still surprising.” These days, the S & P 500 is higher quality and has lower earnings volatility than prior decades, Subramanian pointed out in a Wednesday note to clients. She added that the index has shifted from being heavily concentrated in manufacturing, financials and real estate companies in 1980 to more innovation-oriented tech and health care. Although Subramanian said statistical valuation models matter in the long term and do imply lower returns over the next decade, near-term factors, such as sentiment and earnings surprises, suggest the broad market will likely continue to climb, reaching a year-end value of 5,500. .SPX 1Y mountain S & P 500 performance. “It’s hard to be bullish based on valuation: the S & P 500 is statistically expensive on 19 of 20 metrics and is trading at a 95th percentile price to trailing earnings ratio based on data back to 1900,” Subramanian wrote in the note. “But at a basic level, we question the validity of comparing an index to its younger selves, especially today’s S & P 500.” The S & P 500 has added 6.2% so far this year, continuing its bull run from 2023 when it soared 24.2% on the back of artificial intelligence-related hype and huge gains by major technology stocks. But while sentiment is broadly bullish, Subramanian pointed out that pension funds have the lowest allocation to public equity in 20 years, which implies that the U.S. isn’t necessarily in a “bull market where everybody is euphoric on stocks.” Instead, she noted that investors are piling into just a few widely loved stocks. “We’re still in this wall of negativity, this wall of worry,” Subramanian said on CNBC on Wednesday. “Folks are hiding out in certain themes like AI, which has obviously been a great story, but I think there’s more to go in terms of GDP-sensitive companies actually coming back to life.”