GDP Perspective

The last time the S&P was in the 680s (as the futures are trading right now), the nominal GDP was 7.86T (September 1996).

Right now, nominal GDP is almost double at 14.2T. If you chop off 10% from peak nominal GDP of q3 2008 of 14.4T, we end up with 12.9T as the trough. 20% off = 11.5T. Still quite a far way from 7.86T, especially considering you only need 10% to formally dip into a "lowercase" depression. The Great Depression peak to trough witnessed a 45% decline in GDP. An equal fall in GDP (Great Depression "2"), would result in nominal GDP at 7.76T, right about where we see the S&P has already found its way to.

If the GDP shrunk almost 45% from here, we'd have a fairly valued S&P at these prices. I'd like to think size of GDP somehow correlates to long term residual earnings power of the market.