Despite the Large Cap Technology stocks leading the S&P 500 Index to a historic high, the current market valuation has made some believe it is extremely overvalued, but an Analyst from ProShares Advisors stated that this may be an unnecessary concern.

Simeon Hyman stated during an interview with Bloomberg Television last Friday: "The issue comes down to this surprising fact: the leverage in the stock market is much lower than it was 20 years ago."

This Global investment strategist admitted that stock prices are indeed high. Typically, at the current U.S. Treasury yield levels, the average PE ratio for stocks should be between 18 to 20 times — whereas currently, this ratio is about 25 times.

Other Indicators also further suggest that market valuations have reached historical extreme levels.

However, Hyman pointed out that the lower leverage can reduce the risks associated with high PE ratios. Compared to 20 years ago, the net debt/EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) ratio for the S&P 500 has decreased from 5 times to 1 time.

The report also found that today's stock returns primarily come from Assets rather than debt-driven growth, indicating the presence of intrinsic profitability.

Hyman said, "The significant decline in S&P 500 leverage and the robustness of earnings (partly due to the Technology industry) suggest that at least part of the enthusiasm driving the expansion of the PE ratio may be rational."

Nevertheless, the overheated market this year increasingly unsettles investors and has caught the attention of notable figures on Wall Street, such as David Einhorn. This billionaire hedge fund manager warned in October that traders are pushing up the most expensive market in decades.

However, this does not mean the market is in a bubble, he wrote, and Analysts generally agree that investors should continue to hold their exposure to U.S. Stocks. Nonetheless, calls for a correction have strengthened this month, especially if the 'Magnificent Seven' top Technology stocks erase their recent gains.

Matt Powers, managing partner of Powers Advisory Group, stated that given the high concentration of these Large Cap stocks, earnings falling short of expectations in 2025 could 'change the market'. Therefore, even with strong growth in Technology stocks, investors should emphasize the importance of diversification next year.

Even without a correction, if the momentum of the 'Magnificent Seven' fades, traders may also need to prepare for waning returns. Overall, Wall Street Institutions expect the S&P 500 to continue climbing, with an average year-end Target Price of about 6539 points.