Estimates for S&P 500 earnings have been coming down and now stand at $102. With the S&P 500 at around 1400 we are at roughly 14 times forward earnings. This seems fair but on the generous side given the uncertainties and negative economic momentum.
Companies like Mcdonald's and Priceline continue to lower estimates. The momentum of the world economy and earnings are lower and the economy will not turn on a dime. When the economy is at stall speed there is a high risk of a negative shock. Fundamentally and from a valuation standpoint I do not like the risk/reward in the market.
The stock market is not the economy and the two can diverge for long periods of time. There are some positives from a market perspective. Market participants are not positioned aggressively and a rising market increases the pressure for those underinvested to get back in. Additionally, ultra low rates allow companies to lever up, repurchase shares or do cash takeovers. Many yield hungry investors are looking to dividend stocks rather than bonds.
While I do not like the risk/reward I respect the bull case. The stock market has spent the better part of the last twenty years being overvalued so there is no reason it cannot go there again.