We can discuss Greece, China, moving averages and crowded trades without end. And we will.
But over any significant span of time, the stock market is driven by corporate profits and what investors are willing to pay for them.
Using this undeniable two-factor principle, it makes almost perfect sense for the market to be trading exactly where it is.
Near the end of July 2014 – nearly 15 months ago – the collective forecast for the next 12 months’ S&P 500 (^GSPC) companies’ per-share earnings was $127.71. Right now, the 12-month forward forecast is at $127.62, within a whisper of where it was a year-and-a-quarter ago.
And the S&P 500 itself was at 1987 late July of last year, or 15.6-times forward earnings. Today, the index is at 1995 as of last night’s close, 15.6-times expected earnings.