Stocks are expensive, and nobody cares

We’ve reached an alarming, albeit entertaining, stage of any stock market rally: Motivated reasoning and justification. Not only are well-known bears capitulating, but banks are publishing research notes about how this time is really really different, which we’ve heard is always a good sign.

If you compare the S&P 500’s price to its free cash flows, it doesn’t look quite so expensive, UBS points out: The bank is correct in arguing that large-cap companies have become more tech-heavy and “capital light” over the past two decades, meaning they generate more cash per dollar of sales: Could this trend ever change? It’s tough to say what the future may bring, especially when it comes to external pressure on US companies to spend more on heavier industry and domestic manufacturing.

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