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Excerpt from fund manager John Hussman’s weekly essay on the US market:

S&P 500 earnings are currently at the peak of a long-term 6% growth line that has connected cyclical peaks in S&P earnings going back as many decades as one cares to look (this doesn't mean that the growth rate from every single peak to the next one is 6%, but as you can quickly observe from last week's chart, a simple 6% peak-to-peak trend does a good job of describing the entire growth history of earnings).

What's important here is that excluding the late-1990's bubble peak, when S&P 500 earnings have even been close to that trendline (say, within 20%), the average price/earnings ratio for the S&P 500 index has been closer to 9 or 10 – about half current levels. As usual, that's NOT to imply that stocks are about to drop in half, but investors should certainly not look carelessly at a market trading at 18.2 times top-of-channel earnings.

It's interesting that the current P/E is about double its “normal

Source: John Hussman on the Case for Risk Management