The remarkable comeback of stocks this year was thanks to the Federal Reserve’s generosity. Since March 2009, over $15 billion inflows have come into local stocks, more than compensating for the outflows that shattered stock prices in 2008. The avalanche of fund flows lifted valuations higher despite earnings momentum remaining markedly weak for a large part of 2009. Now, signs of a revival are evident but looking at current stock valuations, companies have to actually go and get those profits to justify a further rise in their share price and, in some cases, the rise that has already materialised. While the fiscal deficit leaves little room for further government-spurred growth, exit policies and worries about a possible monetary tightening weigh on the markets. But then, in the wake of easy liquidity, who is to say how far the market can go, and how much more the P/E could expand even if earnings do not match up to expectations.