argues that the market is being held down by commodity prices. The thought being that high commodity prices have put a lid on market multiples. This “earnings multiple compression” effects the entire market, and very few analysts are looking for higher multiples. Although there is further risk of higher interest rates because of commodity price pressure, this post is an example of interesting contrary thinking:

If these commodity prices begin declining, the “earnings multiple compression” currently affecting the market could turn into “earnings multiple expansion.” Right now, the market is trending at the bottom end of the long term price channel. I believe the market could easily move back to the middle of the long term price trend. That would imply a move to 1,500 or 1,600 on the S&P 500. I believe that a “earnings multiple expansion” led by a move lower in commodity prices could spur such a move higher in the S&P.