The stock market and the economy are telling two different stories

By Yun Li

The S&P 500's monster rally has notched the best two-month start to a year since 1991, but by one simple measure, the market pricing seems to be ignoring the economic reality.

Starting at a few points below 2,800 on Tuesday, the S&P 500 is currently trading at more than 16 times the 2019 earnings estimate for the S&P 500 firms of $172.50. But with all the bearish signs in the market — from slowing global growth to downward earnings revisions to recession fears and the Federal Reserve's tightening possibilities — the stock valuation is looking too high and is assuming the risks would be resolved in a positive way, according to Tom Essaye, founder of Sevens Report Research.

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