Very interesting chart here on the S&P 500:
While everyone is talking about P/E multiples going above historical averages, free cash flow yield is in fact near historical high (even factoring in the double digit rally in the S&P this year which isn’t shown in the graph). I think this is very likely a result of an improvement in the quality of earnings. The reality is that industries are getting markedly less capital intensive in the United States and return on capital has structurally improved over the last two decades.
Lower interest rates may very well be the main reason for the market rally in the last two years but I think the market is far from overvalued.