Actually, what matters is the differential between the stocks earnings yield (the reverse of P/E), and the 10yr bond yield. The stocks are underpriced by this yardstick, as well.
<i>"The current P/E ratio of S&P 500 is the lowest in the last 10 years, making the stocks very inexpensive. "</i> That is fundamentally true. So, why aren't the indexes rallying hard on rising volume each time they break to new highs? Where are all those long-term investors trampling each other at the bullish feeding frenzy? Definite disconnect somewhere.
I dont understand why all of sudden we are going to have multiple expansion this year. The ten year was roughly in the same spot 3 years ago. If investors really wanted to pay up wouldn't they have done it years ago?