Vanguard S&P 500 ETF’s Valuation Defies Conventional Metrics Amid Record Highs

The Vanguard S&P 500 ETF (VOO) continues to defy traditional valuation metrics, trading NEAR all-time highs despite earnings growth lagging behind price appreciation. With a year-to-date gain of 8.5% and a staggering 66.4% surge since 2023, the ETF's resilience highlights shifting market dynamics.

Operating earnings per share—a cleaner metric excluding one-time charges—rose just 3.5% over the past year, compared to the index's 10.7% climb. The disconnect widens over longer horizons: 77.9% price growth versus 21.6% earnings growth across three years. This divergence suggests investors are pricing in future productivity gains or accepting lower returns in a low-yield environment.

While crypto markets often exhibit similar disconnects between network adoption and token prices, traditional finance now mirrors this behavior. The S&P 500's forward P/E of 21x remains below dot-com bubble levels, leaving room for debate about whether this constitutes froth or a new paradigm.