How is this adding up? ( PART 2: continue)

One explanation is that stocks are forward looking.

The below chart shows how the S&P 500 rally since June 16 has been driven by forward P/E - not forward EPS.

In other words, the market is expecting prices to surge despite bad upcoming earnings.

How is this possible?

With the Fed softening its hawkish posture recently, stocks are up on the hopes of new cheap money flooding in.

This turns financial markets into one huge bet on the money printer coming back online.

The underlying economy, i.e. fundamentals, don't matter as much in the eyes of the market.

It only matters what the money spigot does.

Yes, inflation is raging.
Yes, oil prices are down as demand is being crushed by recession. Yes, housing might suffer with high interest rates...
Yes, the markets are expecting more cheap money.

They could be wrong of course...

But for now, stocks and crypto are already looking around the corner and betting on the money printer going "brrrrrr".