Stock Market Optimism and Media Manipulation

January 2025

Yesterday, I witnessed a glaring example of media misinformation while watching a Slovak TV channel. During the prime-time news, the report confidently claimed that the growth of the S&P 500 index was directly tied to the growth of corporate earnings. Accompanied by charts of recent stock price developments, this narrative was presented as fact—but it was nothing more than an overly optimistic distortion. It was yet another example of the excessive optimism I highlighted in December 2024.

The reality tells a very different story. Over the past two years, the earnings of American companies in the S&P 500 index have not kept pace with their share prices. Stock prices have risen dramatically faster, resulting in a historically high price-to-earnings (PE) ratio. This valuation metric, which is public and readily accessible, reflects heightened expectations for future earnings growth—expectations now at historically elevated levels.

The market is brimming with optimism—but is it truly justified?

Such a wide gap between share prices and underlying earnings often signals trouble ahead. Whether through price corrections or long-term stagnation, the current market dynamic suggests that this optimism may soon face a harsh reality.

As I wrote before, this isn’t a reason to panic, but it is a reason to pause, ask questions, and ensure decisions are based on facts rather than narratives.