S&Ps currently projects 2009 earnings on S&P of $48.10... taking a longer-term average of around 15 times earnings gives a valuation of 721.5, again, just slightly above the current level.
So, based on... long-term earnings considerations, the market is just below a middling valuation.
If the exceptional monetary stimulus since September produces inflation, or the unprecedentedly large budget deficits in fiscal years 2009 and 2010 “crowd out” private investment, then growth and earnings prospects for the next few years would be below average. In that event, the market as it stands today would be overvalued.
