Valuations are not in sync with history.

The chart below shows the Price/earnings ratio for the S&P500 in different inflation environments, using Core PCE as a proxy. The conclusion of the chart seems to be that something’s gotta give: Either inflation recedes and then P/E can remain close to current levels to be consistent with history, or P/E will need to adjust downwards significantly (to 15) to be within historic guidelines. Furthermore, earnings should be revised downwards, to reflect the slowdown in the economy and the effects of the dollar strength. Than means that price needs to adjust even more.

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Source: Guggenheim, Bloomberg.