My main thought is we now have 400 per year as a new anchor for what the index is capable of earning in the foreseeable future. It may not happen in CY27. The timeline may slip by a few years. But it does help make sense of why the index is close to 8000 and talk of 9000 has now started dripping into CNBC conversations...

It looks like an unsustainable equity bubble in a lot of ways, but you're right that one of the ways that it looks reasonable is that it's a bubble in earnings, not just a bubble in prices, so valuations on some metrics don't look that bad. P/E ratios have not soared the way they have in the past bubbles: both P and E are soaring in tandem. At least estimated forward E : )

For anyone geeky enough to ponder where such huge profits come from, and perhaps therefore a dim glimpse of where they might be headed, this is a *very* interesting read about the Kalecki-Levy profit decomposition. For a macroeconomic explanation, it's surprisingly understandable.
blog.variantperception.com - Understanding the kalecki levy corporate

The things that drive higher corporate profits are:
Higher investment
Higher dividends
Lower household saving
Lower government saving (bigger deficits)
Lower rest-of-world saving (bigger deficits)

Since that article is a bit old now, June 2024, those pondering the future may be interested that the US household savings rate has fallen from 5.7% then to 2.7% now, so #3 is onside for higher profits, as are #1, #2, and #4 by my reckoning. With no end in sight of stupendous government deficits, weirdly high profits as a share of GDP may continue for some time.

Of course, the actual *value* of equities would require that those profitability levels be more or less permanent, which would require the levels of those macro factors to be more or less permanent, which I would not bet on.

Jim