We would suggest several things:

1. Current reported earnings are around 20% above trend.

2. The recovery from the Great Recession has been V-shaped, and earnings have exceeded the 2008 peak. We believe this shows the global nature of current earnings and the excellent performance of US management.

3. The 1970s was a better period for earnings growth than the 1980s - nominal growth drives earnings and dividends.

4. Both actual and trend earnings have doubled since 2000; thus, the lost decade was a function of valuation.

Turning to stock markets, what matters is the multiple of earnings, or price-to-earnings (PE), that investors are willing to pay. Bull and bear markets are driven as much and often even more by PE multiple changes than by earnings themselves.

David Fuller's view Subscribers will be interested in the two earnings graphics in The Weekly View.

Point 4 above is consistent with the valuation contraction hypothesis that Fullermoney often mentions, including in Monday's Comment.

I agree that bull and bear markets are often driven by PE multiple expansion and contraction. And the key variable influencing these moves is monetary policy, determined by the US Federal Reserve and other central banks.

I encourage RiverFront to add an historic graph of the S&P dividend yield in a future issue. While the S&P 500 yield is currently only 2.1%, many US Autonomies and Dividend Aristocrats provide considerably higher yields, as Fullermoney has pointed out on innumerable occasions in recent years. The same is true for many of the world's other stock markets.

So where does this leave us at a time when many commentators continue to predict that the S&P will retest its 1Q 2009 low or even fall further within the next year or two?

I maintain that this is unlikely due to a combination of factors: 1) the valuation contraction, most notably in the form of higher yields as companies have increased dividend payouts; 2) accommodative monetary policies in the form low interest rates and QE.

Inevitably, there are risks which could prove me wrong, although I regard most of them as outliers. The biggest risk is the Eurozone and a break-up of the single currency. I am less pessimistic and think that we may have passed the nadir of this crisis now that the ECB is stepping in as the lender of last resort. Also, politicians are no longer in denial over the need for banking union and mutualisation of debt if the euro is to survive.

China is often cited as a risk and the Shanghai Composite Index, while selling near PER and Yield valuations which have previously supported bull markets, continues to underperform and has yet to break its medium-term downtrend. However, China has only recently begun to reverse its previous monetary tightening bias.

I am concerned by the latest increase in Brent crude oil which I discussed in more detail on Monday and believe is due more to speculation than demand.

Additionally, the declining trend in the velocity of money is not favourable for GDP growth, as discussed by Eoin below.

Nevertheless, these problems have been at least partially discounted by stock markets, most of which have rallied in recent weeks.Subscribers will be interested in the two earnings graphics in The Weekly View.

Point 4 above is consistent with the valuation contraction hypothesis that Fullermoney often mentions, including in Monday's Comment.

I agree that bull and bear markets are often driven by PE multiple expansion and contraction. And the key variable influencing these moves is monetary policy, determined by the US Federal Reserve and other central banks.

I encourage RiverFront to add an historic graph of the S&P dividend yield in a future issue. While the S&P 500 yield is currently only 2.1%, many US Autonomies and Dividend Aristocrats provide considerably higher yields, as Fullermoney has pointed out on innumerable occasions in recent years. The same is true for many of the world's other stock markets.

So where does this leave us at a time when many commentators continue to predict that the S&P will retest its 1Q 2009 low or even fall further within the next year or two?

I maintain that this is unlikely due to a combination of factors: 1) the valuation contraction, most notably in the form of higher yields as companies have increased dividend payouts; 2) accommodative monetary policies in the form low interest rates and QE.

Inevitably, there are risks which could prove me wrong, although I regard most of them as outliers. The biggest risk is the Eurozone and a break-up of the single currency. I am less pessimistic and think that we may have passed the nadir of this crisis now that the ECB is stepping in as the lender of last resort. Also, politicians are no longer in denial over the need for banking union and mutualisation of debt if the euro is to survive.

China is often cited as a risk and the Shanghai Composite Index, while selling near PER and Yield valuations which have previously supported bull markets, continues to underperform and has yet to break its medium-term downtrend. However, China has only recently begun to reverse its previous monetary tightening bias.

I am concerned by the latest increase in Brent crude oil which I discussed in more detail on Monday and believe is due more to speculation than demand.

Additionally, the declining trend in the velocity of money is not favourable for GDP growth, as discussed by Eoin below.

Nevertheless, these problems have been at least partially discounted by stock markets, most of which have rallied in recent weeks.