Exchange traded fund (ETF) investors have profited from the "new paradigm". Since the end of 2003 the S&P 500 is up 26% and the U.S. price/earnings multiple has lowered from 17.5 to 15 times. Normally, in bull markets, both earnings and multiples rise, reports Answers may lie in that the cost of equity has risen. Other indicators are credit spreads. An alternative explanation is that anticipated earnings will weaken. The bottom line is that stock prices are up but earnings growth has increased at a faster rate thus creating lower valuations. Good news no matter how you slice it.

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