The S & P 500 is historically pricey at the moment, but the Trump administration’s push for deregulation could clear a path for the market rally to continue, according to Bank of America. Equity and quantitative strategist Savita Subramanian said in a note to clients that the S & P 500 is more expensive than average based on 19 of 20 indicators tracked by her team. That includes a forward price-to-earnings ratio of 22.1 — almost 40% above historical average — and an enterprise value to sales ratio of 3.36 — or two thirds higher than the long-term trend, according to the note. However, there is still at least one promise of the Trump presidency that is not yet reflected in stock prices, Subramanian said. “Policy headlines have been dominated by tariffs – perceived to be growth-negative – but a growth-positive component of Trump 2.0 is deregulation, via cost cutting and efficiency gains,” Subramanian wrote. “Industries that presumably stand to gain most are those that are most regulated.” The stock groups that could get a boost from deregulation are also cheaper than the Big Tech stocks that have dominated the market over the past two years. Subramanian highlighted consumer goods, commodities, financials and transports as areas that could benefit from lighter regulation. “We find a strong inverse relationship between the number of regulations (source: QuantGov) and forward P/E ratios – i.e., more expensive = less regulated. … And a loosening of the M & A backdrop could benefit Financials from a fee perspective while boosting returns on capital in less expensive, fragmented sectors like Staples, SMID Health Care, etc,” Subramanian added. The financials sector has been off to a solid start in 2025, but was under pressure on Thursday. The Financial Select Sector SPDR Fund (XLF) was down about 2% in midday trading. XLF 1D mountain Financial stocks were under pressure on Thursday after a strong start to the year. Deregulation has been touted as a priority by Trump and other members of his administration, but the exact extent of those changes are not yet clear. While the Securities and Exchange Commission seems more open to cryptocurrency under Trump, the Federal Trade Commission and Department of Justice have said they will keep Biden-era rules for reviewing corporate mergers . — CNBC’s Michael Bloom contributed reporting.
