With this year’s stock market gains so concentrated among the Big Tech companies with huge bets on Artificial Intelligence, markets were extraordinarily volatile before and after the election.

Take a breath, equities remain reasonably priced and still a good long-term bet for your savings.

The S&P 500 price-earnings ratio is about 30. Over the last 25 years, it has averaged about 26 and at the last business cycle peak in February 2020, it was 27.

However. American companies are becoming more efficient and profitable. Estimates for 4^th quarter annual sales and profits growth are 4.8% and 12.2% and for 2025, 5.7% and 14.8%.

If stock prices stalled, realizing those gains would pull the S&P 500 P-E within historical norms and make stocks a good value.

Analysts at Goldman Sachs created a stir in October with forecasts, based on Robert Shiller’s Cyclical-Adjusted Price-Earnings ratio, indicating the outlook for stocks is poor and bonds may be a better bet over the next decade.

CAPE is the ratio of average stock prices to inflation-adjusted average earnings for the last 10 years. Currently, that figure is about 38, well above the 25-year average of 28.

Ten years is arbitrary and doesn’t correspond to the average length of business cycles— the most recent expansion lasted 146 months and was killed by the COVID shutdowns. Profits in the numerator for the most recent CAPE calculations are depressed by the extraordinary pandemic shutdown and recession.

Moreover, over the decades markets have gradually supported much higher P-E ratios—for the 25 years ending in 1999, the S&P 500 P-E ratio averaged about 15.

The Magnificent Seven—Alphabet, Amazon, Apple. Meta, Microsoft, Nvidia and Tesla—are about one-third of the S&P 500 and account for about half of the S&P 500’s gains this year.

The Goldman Sachs argument leans heavily on the fact that it is difficult for large firms to sustain over the long-term outsized revenue and earnings growth. They expire the scope for gaining new customers once they dominate markets and then attract competitors and attention from antitrust regulators.

In the 1960s and early 1970s, the Nifty Fifty led big gains but by the 1970s ultimately was a lost decade for equities. The late1990s tech boom, led by Microsoft, GE, Cisco and Intel, was followed by weak stock gains in the 2000s.

Nvidia graphics chips that provides the foundation for its AI chips are special purpose semiconductors, Graphic Processing Units, as opposed to the Central Processing Units that are the brains of personal computers.

AMD is launching its own GPU to take on Nvidia. Broadcom, the largest designer of application-specific processors, is teaming with OpenAI to develop a specialized chip to perform inference functions—running AI agents trained for specific tasks.

None of those companies are among the MAG7. The salient point is that the technologies that powered AI are creating opportunities for others.

In the technology space, the companies to watch are those well experienced with business software applications, like Salesforce and Adobe, and who are marketing AI agents—specialized programs that firms can be immediately applied to boost productivity and save labor.

We should ask: What is the potential for broader economic growth and new profitable firms across the economy?

Since 2016, the U.S. economy has grown at 2.5% annually, well above the 1.8% long-term pace assumed by the Congressional Budget Office and Federal Reserve policymakers.

Spending on AI equipment and services is estimated to rise from $185 billion last year to about $900 billion in 2027 and increase labor productivity by perhaps one percentage point a year.

Many jobs will be created and destroyed, but the economy is poised for a growth trajectory closer to 3% than 2%. And it won’t just be companies we now recognize that prosper.

In September 2021, CAPE computations were throwing off similarly bearish signals for stocks.

Since that time, the S&P500 has gained more than 25%.

Over the last 25 years, the average returns on the S&P500, 10-year Treasuries and real estate (single family dwellings), have been 9.1%, 3.8% and 5.2%.

If you can pick the next Nvidia, have at it, but history teaches that unicorns are tough to spot before their horn emerges.

My advice remains the same. Don’t overinvest in housing. Keep enough funds to tide you over emergencies and meet big expenses like a child’s college tuition in a money market and staggered-maturity, fixed-income assets like Treasuries and CDs.

Invest the rest in a diversified portfolio or broad U.S. index fund—for example, the Vanguard Total Market Index Fund—and perhaps put a portion in a similar international or emerging markets fund.

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Peter Morici is an economist and emeritus business professor at the University of Maryland, and a national columnist.