The first week of December is gone and so far the market keeps pushing higher. As it awaits the unemployment number today, to measure the pulse of the economy, investors are confident the new administration that will be inaugurated on Jan 20th will be able to increase growth by eliminating unnecessary regulations, and unnecessarily agencies, while maintaining inflation at ease and unemployment under 5%. Valuations, however, are another matter. As you can see in the chart below, market cap weighted trailing P/E for the S&P500 is 25. Over the last 20 years, only during the pandemic was it higher than today. Can government efficiency make valuations more attractive? Is the optimism surrounding the new administration enough to keep pushing markets to new highs in price without the support of earnings?
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