Why are markets so high today? Yes, as previously mentioned, it's in part due to the very low cost of borrowing (and buying back stocks), that small business failing means big business profits.
But, the markets were high before COVID. I think it's largely because there's no where else to go. With bond rates very low (and a risk if interest rates rise of losing money on bond holdings), and with fixed interest rates so low (that you're actually losing money after inflation and taxes) -- where else do you go? Gold, property, art? Those are tangible assets that can do well to offset inflation but not vehicles for the masses to save for retirement. So everyone goes for stocks and mutual funds. That drives up the price and the market and P/E ratios keep going up due to optimism that it's never going to end and perception that there's nowhere else to go.
What's wrong with that? What happens when interest rates rise? Yes, the government wants to keep rates low to fund the debt, but at some point the theory of unlimited demand for treasury bonds will be tested and rates may rise anyway. Then things will get very interesting. Bond returns will start rising and fixed rates as well. As people gradually start to move away from stocks to bonds/fixed returns the market may start falling. And it may fall (or remain flat) for a LONG time - perhaps the amount of time we saw the rise - decades.
But nobody knows when. I know many who got out of the market 3 years ago to miss out on great returns since. Trying to time the market is a scary thing. Divesting of asset types is likely a good idea. There are more strategies than just stocks/bonds/fixed.
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