Charting our Focus

 Ninety Percent of S&P 500 Is at Historically Low Valuations

Excluding the megacaps, stocks of the S&P 500 are trading at the biggest discount since the early 2000’s, presenting a potentially opportunistic tailwind for active management.

The largest stocks in the S&P 500 have driven the returns of the index in recent years. A byproduct of that dominance is that it has skewed the most common gauge of expensiveness of stocks – the price/earnings ratio (P/E).

• The S&P 500 Index, when excluding the top 10% of stocks (based on market capitalization), is trading at its second-lowest P/E level in 37 years relative to the index overall.
• This discrepancy of P/E values between the top 10% and bottom 90% of the S&P 500 is a result of a narrow market in which a limited number of stocks have driven much of the returns.
• The last time the bottom 90% of S&P 500 stocks by market capitalization traded at such a substantial discount to the overall S&P 500 was during the dot.com bubble. After the dot.com bubble burst, the relative P/E of the bottom 90% stocks increased for years.

In our view, this valuation discrepancy indicates that the risk-reward profile for investors may be more favorable for the lower 90% of S&P 500 stocks (based on market capitalization) than for the top 10% of stocks, many of which have come to dominate US large cap indices.

By underweighting the top 10% of the S&P 500, active managers may gain a performance tailwind if the valuation discrepancy between the top 10% and bottom 90% narrows, as it did after the dot.com bubble burst. Of course, past performance is no guarantee of future results.

Terms and Indices

Market capitalization – The value of a company that is traded on the stock market, calculated by multiplying the total number of shares by the present share price.

Price/Earnings, or PE, is a valuation measure of expensiveness using a stock’s price divided its by per-share earnings. Forward PE represents analyst consensus estimates of that measure over the next 12 months.

S&P 500 Index – The US Standard and Poor's 500 is a stock market index that tracks 500 publicly traded domestic companies. In this index, the weighting of each in the index is dependent on the company’s market capitalization.

Indices are unmanaged and their returns assume reinvestment of dividends and do not reflect any fees or expenses. It is not possible to invest directly in an index.

Unless otherwise stated, all information contained in this document is from Amundi Asset Management US (Amundi US) and is as of 7/31/2023.

A Word About Risk: Pioneer Fund

The market prices of securities may go up or down, sometimes rapidly or unpredictably, due to general market conditions, such as real or perceived adverse economic, political, or regulatory conditions, recessions, inflation, changes in interest or currency rates, lack of liquidity in the bond markets, the spread of infectious illness or other public health issues or adverse investor sentiment.The Fund generally excludes corporate issuers that do not meet or exceed minimum ESG standards. Excluding specific issuers limits the universe of investments available to the Fund, which may mean forgoing some investment opportunities available to funds without similar ESG standards.

A Word About Risk: Pioneer Fundamental Growth Fund

The market prices of securities may go up or down, sometimes rapidly or unpredictably, due to general market conditions, such as real or perceived adverse economic, political, or regulatory conditions, recessions, inflation, changes in interest or currency rates, lack of liquidity in the bond markets, the spread of infectious illness or other public health issues or adverse investor sentiment.The Fund may invest in fewer than 40 securities and, as a result, its performance may be more volatile than the performance of other funds holding more securities.Investing in foreign and/or emerging markets securities involves risks relating to interest rates, currency exchange rates, economic, and political conditions. The Fund’s adviser may integrate ESG considerations in its investment research process, which may mean forgoing some investment opportunities available to funds that do not consider ESG information.

The views expressed regarding market and economic trends are those of Amundi Asset Management US, Inc. ("Amundi US"), and are subject to change at any time. These views should not be relied upon as investment advice, as securities recommendations, or as an indication of trading intent on behalf of any portfolio.

Investing in mutual funds involves significant risks. For complete information on the specific risks associated with each fund, please see the appropriate fund’s prospectus or fact sheet, available on our  literature page.

Individuals are encouraged to seek advice from their financial, legal, tax and other appropriate professionals before making any investment or financial decisions or purchasing any financial, securities or investment-related product or service, including any product or service described in these materials. Amundi US does not provide investment advice or investment recommendations.

Before investing, consider the product's investment objectives, risks, charges and expenses. Contact your financial professional or Amundi US for a prospectus or summary prospectus containing this information. Read it carefully. To obtain a free prospectus or summary prospectus and for information on any Pioneer fund, please download it from our  literature section.

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