So where do we go from here? Muddling along may be the best scenario for stocks. That's an argument that's been made by a number of strategists, including Ed Yardeni. He's said that the bull market could have more legs as long as the economy continues to neither boom nor bust. His argument: Booms lead to busts by creating excesses, but muddling along should be ideal for stocks.
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A key tenet of this "muddling along" thesis is that stock valuations will remain reasonable. If there is a meltup if and when Janet Yellen is nominated for Fed chair, that could be exactly the kind of bubble that guys like Yardeni—and Wharton's Jeremy Siegel—worry about.
Siegel was on our air Tuesday, and made a similar point by noting that while stocks are not cheap by historic valuations, they are cheap when compared to bonds.
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Noting that the P/E multiple of the stock market was close to its historic norm of about 15, he went on to note that bonds are nowhere near their average yield. That means that Treasury prices would have to come down significantly (and yields go up) to match their historic average. In the past, when we have interest rates this low, P/E ratios have tended to be higher—18 or 19. That means stocks relative to bonds are still cheap, even though relative to history are average.
The contrarian argument, of course, is that bond prices should come down, at which point the equity premium that the stock market now enjoys should decline.
—By CNBC's Bob Pisani. Follow him on Twitter @BobPisani.