The S&P 500 index has risen 12% this year, reaching a record high of 5,372 on Tuesday. The market’s growth is driven by expectations that the Federal Reserve will soon cut interest rates. Interest-rate futures indicate that the Fed will likely reduce rates once or twice this year, starting in September or November.

Despite the positive trend, some experts believe stocks are overvalued. As of June 7, the S&P 500 forward price-earnings ratio stood at 20.7, exceeding the five-year average of 19.2 and the ten-year average of 17.8. RBC Capital Markets predicts that even with moderating inflation and some rate relief, the S&P 500 might end the year at 5,100, lower than its current level of 5,366. In a more pessimistic scenario, if inflation remains high and the Fed cannot cut rates, the index could drop to 4,900 or even 4,500.

For those seeking safer investments amid market uncertainty, dividend stocks may offer a viable option. These stocks provide regular income and potential capital appreciation, though their returns are often lower than those of growth stocks. Companies that pay dividends are typically found in stable, low-growth sectors like utilities, consumer staples, and financial services.