But there are cautionary tales to be seen in the chart, too, since any individual stock can either over- or under-perform. That's why so many experts suggest that, to get started in the stock market, you consider index funds, which hold every stock in an index such as the S&P 500, including big-name companies such as Apple, Microsoft and Google, and offer low turnover rates, so the attendant fees and tax bills tend to be low as well. Warren Buffett, Mark Cuban and Tony Robbins all agree index funds are a safe bet, especially for new investors, since they fluctuate with the market, stay pretty constant and eliminate the risk of picking individual stocks.

Eoin Treacy's view

The subtext of this statement, quoting some of the most venerable investors in the business, is that owning Index trackers is risk free. I’m sure that is not what the likes of Warren Buffett and Mark Cuban mean but both are on the record as saying that ordinary investors have no hope of achieved the same results they have. The article implies you need to own the Index because you have no hope of picking the big winners.

That rationale ignores the fact that the Index is also full of underperformers like Macy’s and Under Armor, because as large companies grow larger their gains outweigh declines elsewhere in the Index.

Low cost passive investing has continued to grow not least because many mutual funds were covert trackers anyway. However, it is important to understand that this is an earnings agnostic strategy.

Simultaneously risk parity has been one of the most successful strategies in the macro hedge fund sector because bonds and equities have had such close correlations. Again, this is a momentum strategy dependent on low interest rates and access to credit that is earnings agnostic. The related short VIX, buying intraday dips strategy is equally earnings agnostic.

Value investors have been warning about the elevated level of the cyclically adjusted P/E for at least three years. However, when large segments of the market are pursuing successful strategies which pay no attention to earnings, no one outside their narrow circle is listening. This combative report from GMO is a perfect example. It makes the legitimate point that valuations are high and not just because of technology companies. However as long as valuations continue to rise investors are unlikely to pay much attention.

The late 1990s was characterised by a contradiction that “earnings don’t matter”. That belief might not be vocalised in the same way today but it certainly forms part of the way people are interacting with the market. Considering the increasingly consistent nature of trends this year reflecting a widening imbalance between supply and demand we can only conclude that the market is either entering or is in the third psychological perception stage of this medium-term bull market which often climaxes in euphoria.