Go back to the start of the year and there was a lot of uncertainty about how US stock markets might do in 2025. So far this year, though, the S&P 500 is up 17%.

That, incidentally, is the same growth we have seen on this side of the pond for the FTSE 100 so far this year. So, the index of leading British shares were valued lower than its US counterpart at the beginning of the year and that remains the case.

The S&P 500’s performance this year is impressive, especially considering the context. We have seen ongoing geopolitical uncertainty, significant and unpredictable shifts in US trade policy, and growing signs of weakening consumer demand in the US economy.

Yet the S&P 500 powers on. In recent days it has been edging closer to setting a new all-time high.

So, should I invest, for example by putting some money into an S&P 500 tracker fund?

I’m getting nervous about some valuations

I do not plan to.

There are several reasons for that.  One is my general preference to invest in carefully chosen individual shares rather than tracker funds.

Another factor is my concern about the valuation of many leading US stocks. To me some of them look unjustifiably high. That does not mean that they will not still go higher. The index may keep climbing in 2026 if investor sentiment remains positive, as it has been lately.

However, I am always nervous about buying a share if I think its current valuation looks too high to justify.

Nvidia sells for 45 times earnings, for example. I like the company’s proven business model and massive profitability, but that valuation looks high to me given risks like a slowdown in AI data centre spending at some point in future.

Yet that valuation is at least one I can get my head around, even if it is beyond my comfort zone.

By contrast, Palantir has a price-to-earnings ratio of 733. This is not some tiddler, but a firm with a $424bn market capitalisation.

Even what is basically a second-hand car dealer (and loan provider) – Carvana – has a market cap of $87bn and P/E ratio of 91.

On the hunt for bargains

Do such valuations mean I have lost interest in the S&P 500?

Not at all – I continue to look for individual bargains within it.

For example, one S&P 500 share that has had a bad 2025 so far is Lululemon Athletica (NASDAQ: LULU).

The yoga retailer has seen its share price drop by 52% since the start of the year. That must be painful even for people trained in having flexibility and a calm mind!

My response to the price fall has been to load up on the shares.

Lululemon’s troubles reflect some of the wider challenges I mentioned above.

Tariffs have eaten into its profitability. The company’s key US market has seen demand fall. Price-conscious shoppers have compared the company’s slow-changing core range to rivals like Alo and some have found it wanting.

But Lululemon has recognised this challenge in the US and is actively addressing it. Meanwhile, it maintains a strong brand and large following.

Internationally, it continues to grow healthily and I see non-US sales as a huge ongoing growth opportunity.