Two charts worth paying close attention to:
The first one from Deutsche Bank:
The above is showing ratio of S&P500 Price/Earnings ratio to VIX (quarterly) volatility indicator. Recent uplift in the series is down to simultaneously:
- Rising equity price relative to earnings, and
- Falling markets volatility
The second one is via TestosteronePit, showing the first bit: rising equity prices relative to falling earnings, except not for S&P, but for European equities:
Care to draw any conclusions as to rational expectations vs short-term profit chasing?..