A quick look at some S&P 500 earnings data:
The 2015 drop-off in earnings does not look scary (yet), however, the chart below shows that each time reported EPS dropped by 10% there was much worse to come.
The P/E expansion this decade has been another major driver of returns. To see another expansion at near peak earnings, we would need to conjure another dot com boom.
The only saving grace is that with most other assets still yielding very little, this may be one of the better places to be. For more in-depth on the narrowing breadth of market and how only a few names held up the index in 2015, please see John Authers’ article in the FT here.