Looking at valuations, the P/E on next year’s S&P 500 earnings estimate is 16.2. That is right in line with the S&P long-term average of 16. That on its face seems bullish to many investors, that stocks are “not overbought” so to speak. Remember though, that 16 is the long-term average P/E meaning it is taking into account bear markets and bull markets.

Average returns for stocks are, in actuality, very unusual. The same is true with valuations. Bull markets are inherently above average, and we should expect the valuations to be the same. The fact that 6 years into a bull market and P/E is not into the 20s (above average), to me indicates there still may be a lot of room for stocks to run.