The US economy is already in its eighth year of expansion, albeit one of sub-par GDP growth until recently. S&P 500 earnings are near all-time highs, as are equity indices and valuations. Goldman Sachs’ global strategy team points out that the US has followed a fairly typical equity cycle post the GFC. After a sharp correction driven by a decline in both earnings and PE ratios in 2008 (labelled ‘Despair’ on the chart), from March 2009 US equities recovered sharply, mainly driven by rising PE ratios in anticipation of earnings growth (the ‘Hope’ phase). In 2010 it entered the ‘Growth’ phase, which tends to last longer and where equity prices increase mainly driven by earnings growth.