There are two ways to view frothy U.S. stocks

U.S. stocks aren't cheap, but that doesn't mean they are too expensive either.

It\’s tough to reason that U.S. stocks are cheap at this time in the bull market rally, but that doesn’t necessarily mean they are too expensive even while the main exchanges continue to near new highs.

For some analysts, price/earnings multiples, as frothy as they seem, have room to grow despite the prospects for tighter monetary policy through the U.S. Federal Reserve sometime later this season. Others believe equity markets south of the border are already pricey enough and recommend investors look abroad for better value.

\”The tightening cycles that saw the greatest multiple contraction came when sentiment was the most bullish,\’ said Savita Subramanian, U.S. equity strategist at Bank of the usa Merrill Lynch in a note to clients.

\”In contrast, investor sentiment today remains extremely bearish, suggesting that there could be upside to valuations if sentiment would improve.\”

Based on Ms. Subramanian’s research, there\’s been only two instances when P/E multiples peaked before the first rate hike during the past five tightening cycles within the U.S.

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