What explains the bull market’s ability to power on despite valuations that eclipse anything other than the dot-com bubble? Everything from passive investing to buybacks is trotted out to explain it, but the real reason is the uncanny predictability of corporate America’s earnings machine.
Patience is being rewarded like at no other time. Thanks to a climb in profits that is as steady as it is steep, valuations that once made noses bleed turn out to be very reasonable when measured against income one or two years later. Call it retrospective P/E -- price divided by earnings that eventually come to pass.