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Our Blue Angels framework allows us to visualize the stock market equation P = P/E * E in one chart, where P is the stock price index, E is the forward earnings of the index, and P/E is the forward valuation multiple. Forward earnings is the time-weighted average of analysts' consensus earnings expectations for the current year and the coming year.
Our analysis of the Blue Angels is that the stock market needs time to consolidate its gains (i.e., the first half of this year) to allow earnings to catch up with stock prices. Let's see what we can see in the Blue Angels for the S&P 500/400/600:
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