If the S&P hits an all-time high on Monday—which would merely require a 0.4 percent rise off of Friday's closing price—it will almost certainly do so on lower valuations than were seen in May, the last time a record was reached.
The point is not that stocks are cheap. To the contrary, valuations are still somewhat elevated in a historical context. Rather, recent moves show that stock prices are relatively stable.
Investors are currently feasting on a spate of corporate earnings, and first reports of earnings season have had an upbeat vibe: 72 percent of the first 61 S&P 500 companies to report beating profit estimates.
That said, they are not clearing an especially high bar, given that earnings shrinkage (as opposed to growth) of 4.5 percent was expected as of the last day of the second quarter, per FactSet.
Earnings should grab attention, but watch commodities
Still, earnings expectations have risen faster than the market level over the past few months, partially because stocks have been so flat. That has given earnings a chance to "catch up" to stocks' high level.
In some ways, this is precisely what is supposed to happen. Investors would expect stocks to pace ahead of earnings as the economic outlook brightens, followed by a drop in valuations as the economic bull case indeed plays out.
That's why the critique of whether the bull market has lasted "too long" is somewhat questionable. In a longer-run context, the performance of stocks tends to be tied to the expected performance of the economy as a whole—which is why the performance of equities is considered to be a forward economic indicator.
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"Sure, we're seven years into a bull market, but we're also seven years into an economic expansion," said Albert Brenner, who heads up the asset allocation strategy team at People's United Wealth Management.
"You might well marry the question, 'How comfortable am I with holding equities now?' with the question, 'How comfortable am I with the U.S. expansion in the U.S. continuing,'" he asked.
Brenner considers stocks to be "not cheap" at best. But since he estimates that the chance of a recession in the near-term is "very low," he still recommends holding onto equities without much fear.