As the S&P 500 trades near historic highs, softening earnings undermine stability.
Paths diverge: Since 2006, the index and its members' earnings followed similar paths through the market cycle. In mid-2014 those paths began to diverge, as earnings growth flattened then declined, while the index continued higher.
Further disconnect: The current disparity is further seen in the rolling correlations between earnings and the index. The recent surge of the index has pushed correlations to 10-year lows.
Overpriced: The price-to-earnings ratio fluctuated along with the index during the volatility of 2014 and 2015. P/E ratios broke further away from their 12-month average than they have since the financial crisis.
Growing divide: Even as both have fallen, the spread between the earnings yield of the S&P 500 and the 10-year Treasury has been on the rise since early 2014.
Source: Bloomberg LP
Compiled and designed by Charles McGrath and Gregg A. Runburg