Driven by earnings growth

Yes, valuations in the S&P 500 remain elevated — both relative to their own history and compared to other markets. Yes, the concentration in a few mega-cap tech names is unusually high.

However, what currently drives the US stock market is earnings growth, not multiple expansion. This marks a fundamental difference from the Internet bubble, when markets were fuelled almost entirely by hopes of future profits rather than actual earnings.

We are, of course, not defying gravity — and we stay selective and prudent in our investment choices. But it is somewhat reassuring that today’s market strength appears to be driven by real earnings rather than mere expectations.