U.S. Stocks Retreat From Four-Month High on Earnings Valuations

Earnings are a moving target. Valuing the market using trailing earnings makes the market look overvalued.

Using forward earnings is a way to try to get around that, however, I have not seen any economic forecasts that fully take into account the huge amount of fiscal stimulus that we have seen applied globally. Even economists that acknowledge the stimulus and factor it into their forecasts, tend to downplay its impact.

Therefore, just as earnings surprised on the downside throughout the entire market slide, so are they likely to exceed on the upside. You have to go back to 1942-1945 to see this level of stimulus and there is no forecast that I have seen that frames the forward outlook in this manner.