We don’t think the stockmarket has gotten ahead of itself.
After the steep decline of the market-riskpremium, the focus of stockmarket investors is changing to earnings confirmation. That bodes well for the near future.

If we take a closer look at the equity-riskpremium (ERP or MRP) of the S&P 500, the ex-ante or forward looking premium, decreased  from it's high of 8% (feb 2009)  to about 6% (beginning of May 2009) to a rounded 5% (4.93%) by august and 4.71% by November 2009.

So, the current MRP is about 30bp below the MRP-high (5%) at the high of the .com crash. Within 1 year, that level declined to 3.5%. After something more than 1.5 year the MRP declined even further, to under 3%.

From this we conclude that although we are seeing a decrease in the speed of decline in the MRP, there still is ample room to decline even further. Because of the heavy weighting of the MRP on the stockmarket valuation case, this means further upward potential.

The character of the stockmarket is changing: When the MRP normalizes, like we are experiencing now and the speed of the MRP decline reduces, investors expect earnings estimates to stabilize or bottom out.

And that’s exactly the confirmation we get from the market right now. This confirmation will continue to improve the risk assessment of stocks. This will have a positive impact on the MRP (read: further decline), which in historic perspective, has room to decline further.
That’s why we’re positive about the stockmarkets in general. We do not foresee a correction is eminent from a value perspective.

note: It is not unusual for stock's dcf valuation to have a 30% sensitivity regarding a 100bp change in the MRP.

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