Mixed signals or confirming signals? There are four variables that determine whether the current secular stock market cycle is in bull or bear territory: price/earnings ratio (P/E), dividend yield, inflation rate, and bond yields. P/E is the pure measure of the stock market valuation level, especially when it is normalized for the business cycle. Dividend yield, directly related to P/E, is a confirming measure that helps to qualify distortions in reported P/Es. The inflation rate is the primary driver of secular stock market cycles. When the inflation rate does not confirm the market’s valuation level, there is likely a cyclical distortion rather than a secular shift or trend (early 2009 is a good example of this contrast). Bond yields, particularly since the 1960s, reflect another financial market perception of the expected future inflation rate. This makes bond yields a confirming measure for secular stock market cycles.