On Tuesday, CME and CBOE TV financial commentator Alan Knuckman said on Fox Business, “Trump’s historic tax cuts will boost most American corporate earnings lines by at least 20% in 2018 — sending stocks soaring still from their current levels.”  He is predicting that the Dow will reach 30,000. He said, “The Dow Jones Industrial Index is now within 21% of the 30,000 milestone which is very achievable after returning 25% in 2017.”

But after being up so much in 2017 isn’t it “overvalued”? You might ask. One reason for optimism is that even after being up so much earnings are up about the same amount. So the P/E ratio is roughly where it was a year ago, i.e. slightly above 21%. That is just slightly above the average level and well below peak levels. With corporate earnings up another 20% due to tax reform this year, prices could go up that much as well and the market still wouldn’t be overvalued.