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Chart of the week

Public markets take a winding, volatile roundtrip in 2025

Despite significant volatility this year, markets have yet to price in any meaningful economic slowdown, posing potential risks and opportunities.

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May 9, 2025 | 2 minute read

Risk asset valuations

Column chart showing a range of valuation metrics across equities and credit markets at the start of 2025 and as of May 7, 2025. The S&P 500 came into the year with its forward price/earnings ratio in the 93rd percentile relative to recent history, while credit spreads were testing their post-Global Financial Crisis tights. Despite the significant volatility markets have seen so far this year, equity valuations have generally held steady, while valuations for foreign stocks have risen. Credit spreads have widened across bonds and loans, though remain tighter than historical average. Public markets have yet to price in any meaningful economic slowdown despite still significant macro uncertainty.

Source: Bloomberg, BofAML, Pitchbook, as of May 7, 2025. Small caps represented by Russell 2000 Index, Global ex-U.S. represented by MSCI World ex-U.S. Index.; Investment grade bonds represented by BofAML IG Corporate Index, High yield bonds represented by BofAML HY Bond Index; Leveraged loans represented by Pitchbook LCD Leveraged Loan Index.

  • Markets have traversed a winding, volatile path this year, only to end up near where they started.
  • At the start of the year: Risk assets were in a euphoric mood, buoyed by a strong economy and optimism around growth policies from the new U.S. administration. The S&P 500 had a forward price/earnings ratio in the 93rd percentile relative to recent history, and credit spreads were testing their post-Global Financial Crisis tights.1
  • Today: U.S. equity valuations have generally held steady, while valuations for foreign stocks have risen, despite stocks’ highly volatile path that has included the S&P 500 briefly entering a bear market.1 Credit spreads have widened across bonds and loans, though remain tighter than the historical average.1
  • Against an uncertain macro environment and a backdrop of richly valued public equity and credit markets, the opportunity in private markets, where valuations are not subject to daily swings based on fear or euphoria, may be particularly attractive.

  • Bloomberg, BofAML, Pitchbook, as of May 7, 2025.

The chart of the week and any accompanying data is for informational purposes only and shall not be considered an investment recommendation or promotion of FS Investments or any FS Investments fund. The chart of the week is subject to change at any time based on market or other conditions, and FS Investments and FS Investment Solutions, LLC disclaim any responsibility to update such market commentary. The chart of the week should not be relied on as investment advice, and because investment decisions for the FS Investments funds are based on numerous factors, may not be relied on as an indication of the investment intent of any FS Investments fund. None of FS Investments, its funds, FS Investment Solutions, LLC or their respective affiliates can be held responsible for any direct or incidental loss incurred as a result of any reliance on the chart of the week or other opinions expressed therein. Any discussion of past performance should not be used as an indicator of future results.

This information is educational in nature and does not constitute a financial promotion, investment advice or an inducement or incitement to participate in any product, offering or investment. FS Investments is not adopting, making a recommendation for or endorsing any investment strategy or particular security. All views, opinions and positions expressed herein are that of the author and do not necessarily reflect the views, opinions or positions of FS Investments. All opinions are subject to change without notice, and you should always obtain current information and perform due diligence before participating in any investment. FS Investments does not provide legal or tax advice and the information herein should not be considered legal or tax advice. Tax laws and regulations are complex and subject to change, which can materially impact any investment result. FS Investments cannot guarantee that the information herein is accurate, complete, or timely. FS Investments makes no warranties with regard to such information or results obtained by its use, and disclaims any liability arising out of your use of, or any tax position taken in reliance on, such information.

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