Profits Are at Record Levels, So Why Aren't Stock Prices?

So if stock prices are a reflection of future earnings, why hasn’t the U.S. benchmark returned to this record high yet? Currently, the S&P 500 is 20 percent below that 2-year old peak.

“The expectation is that earnings may decline if Europe can’t get out of its own way,” said Karen Finerman, president of hedge fund Metropolitan Capital Advisors.

In other words, investors aren’t willing to pay as much for these earnings this time around with a possible European recession set to depress the future profits of U.S. multinationals, not to mention gum up the international banking system. The S&P 500, at a price-earnings ratio of 12.1, is near its lowest valuation of the last decade.

--CNBC