For the past three trading sessions the S&P 500 (GSPC) has closed over 2,000 -- a key psychological level for many investors but one that "has been a problem before," says Matt Krantz, markets reporter for USA Today.
"When we hit these high levels people start worrying 'Are we paying too much?' and if dividends and earnings can't keep up, then we'll have plenty to worry about in the second half of this year," Krantz tells Yahoo Finance in the video above.
But at this point, Krantz says, odds are that dividends and earnings will keep up, or even beat expectations. Corporate cash holdings are at record highs, allowing companies to raise their dividends, and earnings look strong for the second half, says Krantz.
Analysts are expecting 8% earnings growth for the S&P 500--down from 10% at the beginning of the year, says Krantz, but if "companies deliver or even beat [earnings expectations] then this valuation we're at now will look really reasonable."
The S&P 500 is now trading at about 18 times trailing earnings--the earnings over the past 12 months through the second quarter. That's slightly below the average of just under 19 over the past 26 years.
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