Summary

• In recent weeks, major equity indexes have hit record highs, which may seem at odds with geopolitical fears and the performance of other asset classes.
• The first-quarter earnings season has provided fundamental support for the rally in equities.
• In the long run, nothing matters more to equity performance than earnings. That’s due to the simple fact that when you buy a share of stock, you’re buying a sliver of that company’s future stream of earnings.
• Here we take a look at prices and earnings - and the stability between the two is one reason why the price-to-earnings (P/E) ratio is such a common and simple valuation tool.

By Phil Mackintosh, Nasdaq Chief Economist, and Michael Normyle, U.S. Economist and Senior Director at Nasdaq

In recent weeks, major equity indexes have hit record highs, which may seem at odds with geopolitical fears and the performance

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