As EVERYBODY knows, the stock market is booming!  Some people think America has finally hit the Reset Button.  Some think this booming market is merely a result of the traditional good-feeling around a White House rotation to a new president.  Some think it is just a another “Santa Claus Rally” but one on Trump steroids.  Some think it is the justifiable belief that corporate tax reform is at-long-last a certainty.  I think there is clearly some truth to all-of-the-above, that is not the whole story.

Because the economy has not gone into recession since 2008, most people didn’t even notice that business has been in a “profits-recession” for the last year and a half.  In other words, there has been little if any growth in profits — we stalled.  However, that ended in the third quarter of this year.

For 2017, per-share S&P earnings are expected to be $123 on a GAAP basis.  This reduces the stock market’s PE ratio to a fairly-normal 18 times.  That makes the stock market expensive — but not very expensive.

It may be the old “chicken-or-egg” argument.  Did the bull market cause consumer sentiment to reach the highest level since the internet bubble of the late 1990’s?  Or, did the very good consumer sentiment cause the bull market?