In any case, valuation itself doesn’t tell you much about where the markets are going in coming months. The correlation between S&P’s P/E and its return in the next 12 months is close to non-existent, although it is predictive over the long term (as seen in the chart below). 1yr return 10 yr return It’s also noticeable that capital is no longer flowing into money-market funds as a precaution. If the flows were to reverse, equities would be a more attractive option than bonds with 30-year Treasuries yielding less than S&P 500 dividends for the first time ever. Of course, politics could ruin things. If the Congress fails to continue the paycheck protection plan that expires next month it will be a body blow to the markets, but an extension has bipartisan support. The U.S.-China relationship is concerning, but the calculation is that Trump can’t afford another trade war when the economy is headed for a recession.