The S&P 500 squeaked out a 0.1 point gain today, putting it at yet another all-time closing high.
Quartz reporter Matthew Phillips tweeted a 20-year long chart of the S&P 500 while exclaiming, “How about this market?!?”
This ignited a lively exchange among finance’s twitteratti about the state of the markets.
As always, when you consider the level of the stock market, you should take in relation to another metric.
So here’s what we should note about the all-time-high markets:
First, here’s a chart from BTIG’s Dan Greenhaus of trailing 12-month earnings — the mother’s milk of stocks. They are at much higher levels today than during previous peaks.
This second chart comes from JP Morgan Funds’ David Kelly. The annotations show that forward earnings, dividend yields and equity risk premiums are also much higher today than they were during previous peaks. All of these factors effectively make stocks cheaper today.
So, while it is impressive that the S&P 500 is breaking through to new all-time highs, the fundamentals supporting the market are much more robust today.