It might not be as bad as it appears, if you are an optimist.

Net profits and free cash flow are hugely higher as a fraction of GDP in recent years...much higher than even the top of their range from roughly 1950-2004. Consequently, if you think they'll stay high, which is a very big "if", the valuations aren't nearly as terrible as that ratio suggests.

For example, consider the moment at the little short term peak in 2010, when total market cap to GDP was 1:1. Measured one way, the S&P 500 price to free cash flow ratio was about the same then as it was Q4 last year (both up ~75% or something like that), so on that view the "problem" is only the size of the market run-up in 2024, which has in any case been concentrated in just a few big firms. No big deal, just normal variation in the scarily named "zone of reasonableness".

Conversely if you think US profitability will fall back to the late 20th century norm, then look out below. In effect, that means price/sales ratios going back to their old normal range, which is so far below current levels that you'd need a telescope just to see the numbers.

Jim