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Just from a very theoretical level, low interest rates means the net present value (NPV) of companies, ie their stock prices, are weighted more heavily to futur

Just from a very theoretical level, low interest rates means the net present value (NPV) of companies, ie their stock prices, are weighted more heavily to future earnings and not just this year's earnings. So if the market is pricing in some return to normalcy, even if it's a year or two out, you wouldn't expect to see much of a hit. Assuming companies can get from here to there without going bankrupt, something the government has been very explicit about helping with by providing cheap/free funds. Edit: Plus there's FAAMG driving the S&P500 up, who for obvious reasons are doing very well right now.

tfehring 6y ago
This is true but incomplete. The S&P500 is basically at the same level as mid-February, and even if expected earnings for, say, mid-2021 forward are the same as they were in February, the missing earnings between February 2020 and mid-2021 should be reflected in prices. What's missing is that a decrease in interest rates also directly results in an increase in the NPV of future distributed earnings. That increase seems to have offset the decrease in the expected nominal (undiscounted) value of earnings. But this also makes for lower expected returns in the future: In principle, if interest rates and expected earnings stay the same, the unwinding of that discounting is what drives equity returns.