Last year the market grew substantially more than did earnings. Thus, while earnings added to the value of companies, so did an increase in P/E.
From Louis Gave
"Putting it all together, 2018 does seem to be starting on a different note than 2017. While the bull market may not be in peril, it is a tough environment for a price/earnings ratio expansion to occur. Such an outcome usually relies on excess liquidity moving into equities. Yet in 2018, equity markets are more likely to be a source of liquid funds than a destination for them. It follows that if a multiple-expansion is off the table then equity gains will rely on earnings rising. The area where such an improved profit picture is likely is financials (higher rates and velocity) and energy (higher prices). The fact that both of these sectors presently trade on low multiples also helps."
The tax law may increase S&P earnings – maybe by 5% - 10%. If so, this could drive stock prices up or mitigate other factors pulling them down.
So the trick is to pick industries where earnings will be increasing (real earnings, not the fake “reported” ones).