FYI: One of the least understood details of the great 1982-2000 bull market was just how significant the role of investor psychology was.
My favorite example has to do with multiple expansion. When the 1966 to 1982 bear market ended, interest rates were in the double-digits and P/E ratios were in the single digits. The bull market began with a 7X Earnings ratio for the S&P500 in 1982 and ended in 2000 with over 30X earning ratio. Look at how much earnings grew over that period and you cannot help but come to the conclusion that 75% of stock price gains were the result of multiple expansion; only 25% of the gains were the result of increasing profits.
Regards,
Ted
https://ritholtz.com/2019/07/bull-market-earnings-or-multiple-expansion/
