... stocks have soared despite these miserable growth fundamentals. So what gives in this no-earnings-growth environment? Turns out the only thing that has soared is the price-earnings multiple. Over the three-plus years, it expanded by 47% from a P/E ratio of 18.15 on January 1, 2014, to P/E ratio of 26.64 today


This combination of flat earnings and soaring stock prices, and thus expanding P/E ratios, is not uncommon. It comes in cycles: periods of multiple expansion are followed by periods of multiple compression. The current cycle of year-over-year multiple expansion has lasted for 57 months, the longest on record. The prior three record cycles -- which ended in 1987, 2000, and 2009 -- turned into periods of multiple compression associated with blistering crashes.

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