I like the following graphs from a JPM presentation released today.  Here they are and here’s what they’re saying:

We’re currently in a low inflation environement.  Whether interest rates are rising or falling is not known.  However, the reason why markets are hoping for more QE is because the additional stimulus is considered potentially inflationary.  As you can see by the box in the lower left hand quadrant, stocks peform very well in a ‘low and rising inflation’ environement.

Another interesting chart.  Two reasons to be bullish (or at least not overly pessimistic) on stocks in today’s market are that valuations are reasonable and interest rates are low.  The market’s valuation is signified by it’s P/E ratio.  The lower, the better.  Today’s P/E ratio of 12.3 is substantially lower than the P/E of 25.6 at the market’s top in March 2000 and also lower than the P/E of 15.2 in Oct 2007.  Even more importantly, today’s P/E is lower that the P/E at market bottoms in Dec 1996 and Oct 2002.  Furthermore, the fact that the 10-year treasury rate is much lower today than at other times tends to push money into stocks.