A front-page New York Times news article about whether the stock market is overvalued includes this passage:
The market appears overheated by another gauge that investors often use to determine how cheap or expensive a stock is: its price relative to the profits it's expected to make. Currently, the so-called price-to-earnings ratio for S&P 500 companies is above 22, and has been for much of the year. The last time the market was consistently above that level was in 2000.
Actually, the price to earnings ratio is not the price relative to "the profits it's expected to make"; it's the price relative to the profits it already made.
Here is the definition from investor.gov, a website maintained by the federal Securities and Exchange Commission: "A company's P/E ratio is a way of gauging whether the stock price is high or low compared to the past or to other companies. The ratio is calculated by dividing the current stock price by the current earnings per share. Earnings per share are calculated by dividing the earnings for the past 12 months by the number of common shares outstanding." Note the reference to "the past 12 months."
This isn't merely a technical mistake; it has implications for the article's warning that the stock market is overvalued. Most people expect the pandemic to subside over the next 12 months as vaccination takes hold. The expectation is that unemployment will decrease and economic growth will increase. All that should, in most cases, improve corporate earnings over the next 12 months relative to the past 12 months. The stock prices reflect that optimism about future earnings growth. There's a somewhat useful discussion of some of this here that gets into the subtleties of Shiller p/e or a "cyclically adjusted p/e."
It's not even accurate that the last time the market was consistently above 22 was in 2000. According to as-reported earnings P/E data from the S&P website, the number was at 23.62 on December 31, 2015 and stayed above 22 all the way through September 30, 2018.