The benchmark Standard & Poor's 500 Index only has to go up a tick or two before it doubles from its March 2009 trough. The index fell to under 677 on March 9 that year, and closed just short of 1,325 Tuesday. The advance is a 95% improvement in well under two years.
Investors have to wonder if a 2X return is warranted. The market seems poised to move high, and some forecasters believe it could be up another 20% this year. The S&P PE is just above $24. That's not terribly high by historic standards. Earnings among the companies in the index are expected to rise on balance further this year.
The broader economy and expectations for the remainder of the year, however, may not support a further improvement in the S&P. The consensus among analysts is that GDP will rise by slightly more than 3%, which is no better than modest. Credit may be available to large companies, but it is not to small firms. Small businesses are one of the engines of a recovery. If they can't borrow and expand, this will undermine better economic growth.
The largest drags on the economy remain joblessness and the housing market. S&P has forecast home prices could drop another 7% to 10% this year. Foreclosures are still near historic highs. Unemployment rates are not likely to improve sharply. Even Federal Reserve Chief Ben Bernanke does not expect a greatly improved job market for another two years. The unemployed remain a problem for consumer confidence and consumer spending.
We still don't know whether there is such a thing as a long-term jobless recovery. If there isn't, the stock market may peak soon.