Forget the S&P’s 500 valuation, its earnings are flashing red

One consequence of the US stock market’s resilience to the recent sell-off in Treasuries has been a decline in the US equity risk premium (ERP). Nonetheless, the US stock market’s relative valuation is still far less stretched than before the dotcom bubble burst. And its absolute valuation isn’t exactly flashing red either. The sustainability of earnings is more concerning than the price investors are willing to pay for them.