After big gains for the U.S. stock market this year, equity valuations could come under pressure from high interest rates, based on historical relationships, JPMorgan strategists said on Tuesday.

The analysts also said the S&P 500 is overvalued when the post-Covid stimulus and TMT bubble are excluded. Year to date, the S&P 500 is up roughly 16%.

"Equities are up 16% YTD mostly on multiple expansion while real rates and cost of capital are moving deeper into restrictive territory. History suggests this relationship is becoming increasingly unsustainable, posing risk to the equity multiple, especially since earnings expectations already face a high hurdle for 2024," JPMorgan analysts wrote on Wednesday.

The current level of real rate sits at ~2%, implying the S&P 500 multiple is overvalued by ~2.7x or ~3.9x if post-Covid stimulus and TMT bubble episodes are left out, according to bank analysts.

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Meanwhile, inflation ticked up again in August, putting more pressure on equities.

"Forward multiples assume double-digit earnings growth of 12%, which is a high hurdle for this aging business cycle facing increasingly restrictive rate environment," bank analysts wrote. "Moreover, the unsustainable level of global debt (333% of GDP vs. 249% just two decades ago) and a credible rise in inflation risk has contributed to a sharp move higher in long-term rates."

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Global debt provides another negative for an already stretched equity multiple, JPMorgan says, especially since a meaningful portion of the move may be associated with non-growth supply forces like increasing domestic and foreign supply from China and Japan.

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