New vaccines, Biden beginning his transition, Trump losing in courts – yes, things are looking up compared to the way the World seemed about to end for the last 6 months but that doesn't fix our economy. Even the Dow gains of 50% in 4 years are coming off a very narrow-based rally in which just two stocks, Apple (AAPL) and Microsoft (MSFT) are responsible for the majority of the index's gains.
At the beggining of the year, the S&P 500 was priced at an already-high 18.4 times the earnings expected in 2020, and 15.5 times the earnings expected in 2022. Now, it is priced at 26.1 times the adjusted 2020 earnings forecast and no one is sure of 2022. 2021, let's say the 2nd half is "normal" and we have stimulus in the first half – figure 20-21x earnings in 2021 at this pace, still 25% above the historically normal 16x earning for the index.
And, don't forget, all that assumes NOTHING ELSE GOES WRONG.
One of the things that could go wrong is a US Recession/Depression but it looks like we're planning to stimulate our way out of that and that's what put us over the top this week – Janet Yellen is the new Secretary of the Treasury and she helped usher in the low-rater era for the Fed – it's not likely she'll want to oversee the end of it. However, 10-year rates are now at 0.9% anyway, up from 0.3% earlier in the year.