We have never, ever, seen a larger divergence between long-term earnings growth expectations and equity valuations...
[3]
As is extremely evident from the chart above there has historically been a strong relationship between the S&P 500 P/E and 5-year growth estimates. This makes sense as the valuation of the equity market tends to reflect both the short-term (next 12 months) and longer-term growth expectations for corporate earnings.
However, over the past year or so, growth expectations have rolled over dramatically while at the same time valuations (P/Es) have continued to surge ever higher.
The current gap between the two is clearly unprecedented.
For a sense of just how extreme this decoupling is...
[3]
Stocks still cheap? Translation - The S&P is about 600 points over-valued currently.
Chart: Bloomberg and @Not_Jim_Cramer
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