It finally happened.

After a red-hot January that saw stocks rise 6% in a single month, the stock market fell off a cliff in February. Trade has been choppy ever since, but markets have gradually rebounded. Then, on August 21, the S&P 500 finally surpassed its January peak and notched a new all-time high of 2,873.

That peak didn’t last long. As soon as the S&P 500 hit new all-time highs, it reversed course. It was a steady sell-off into the close, and the S&P 500 wrapped up the day at 2,863, about 35 basis points off its all-time high.

Naturally, investors might worry about this. The market hit all-time highs. Those highs didn’t hold, and instead, the market sold off. The ostensible implication here is that appetite to buy into this market at all-time highs is relatively small, and definitely smaller than the appetite to sell at all-time highs.

But, I think that is the wrong thing to takeaway from the S&P 500’s new all-time high.

Instead, I think this new high is simply a sign that this market remains vigorous. Yes, there are yellow warning signs on the road. Yes, trade, inflation, and money tightening risks are all very real. But, the fundamentals underlying the S&P 500 remain strong. Thus, while the era of big gains may be in the rear-view mirror, I reasonably think the S&P 500 can head materially higher over the next 12 months.

Here’s a deeper look.

Valuation Isn’t A Problem

Bears continue to complain about how the market is too richly valued. But, that argument never made much sense to me, and still doesn’t make sense today.

Since 1980, the median trailing earnings multiple for the S&P 500 is 19. The 1980s included multiple bouts with inflation which we haven’t really seen since. Thus, since 1990, the median trailing earnings multiple for the S&P 500 is 21. But, one could reasonably argue that the introduction of the internet economy in 1997 really changed the game for valuations and growth. Since then, the median trailing earnings multiple for the S&P 500 has been 22.

Today, the trailing earnings multiple is nearly 25. So, yes, I understand why some pundits are concerned.

But, the economy is vigorous right now, and sales and earnings growth are robust thanks to technology expansion, consumer strength and tax cuts. This growth is so big that earnings per share for the S&P 500 is reasonably expected to hit $160 this year.

Slap a median multiple since 1980 of 19 on $160 in earnings. You arrive at a fiscal 2018 price target for the S&P 500 of over 3,000. Thus, a historically normal valuation by year end supports an S&P 500 price target of over 3,000 (5%-plus upside).

Growth Is Good

Forward valuations for the stock market are reasonable right now despite stretched trailing valuations because growth is really good.

Earnings growth is robust. The S&P 500 is posting its best earnings growth rate in years. Sure, a lot of that is because of tax cuts. But, attributing robust corporate earnings growth entirely to tax cuts misses the big picture.

Sales growth last quarter was above 11%, a multi-year high. Meanwhile, operating margins (the margins before you factor in taxes) were 11.6% last quarter, also a record high.

Thus, growth in corporate earnings right now is really good, and it has more to do with the strength of U.S. companies and the economy than tax cuts. So long as this strength persists, the S&P 500 should be able to head higher.

The Leaders Look Strong

There has also been a lot of talk about the leaders of this market — the FAANNG mega-cap technology stocks — starting to crack and show signs of weakness.

But, every FAANNG outside of Facebook (NASDAQ:FB) is trading well above its 200-day moving average. And, Facebook is showing resilience just below its 200-day.

Moreover, outside of Facebook and Netflix (NASDAQ:NFLX), none of the FAANNGs are more than 6% off their recent highs, which isn’t that big of a drop considering these are stocks which are up 100%-plus over the past three years. And, Netflix’s recent 20% correction isn’t all that shocking for a stock that is still up 75% YTD.

From a fundamental standpoint, all these FAANNG stocks look good for the next several years. Everyone and everything is going digital. News consumption is going digital. Entertainment consumption is going digital. Communication is going digital. Services are going digital.

Now, with that in mind, think about all the ad dollars that will flow into the digital channel over the next several years, and imagine how much bigger Facebook and Google (NASDAQ:GOOG) can get. Think about all the commerce dollars that will flow into the digital channel over the next several years, and imagine how much bigger Amazon (NASDAQ:AMZN) can get. And, think about all the dollars being pumped into AI, cloud computing, and digital services, and imagine how much bigger Apple (NASDAQ:AAPL) and Nvidia (NASDAQ:NVDA) can get.

In other words, these stock market leaders will likely remain strong for a lot longer. Recent minor weakness is just a temporary pause.

Yield Curve Hasn’t Gone Negative

Bears are also very concerned about the yield curve going negative, as this has historically been a harbinger of bad news.

That is true. But, the yield curve isn’t negative yet. And, the yield curve inverting doesn’t bring about immediate pain. Instead, history shows that when the yield curve does invert, the stock market actually continues to do quite well for a sustained period of time thereafter.

Normally, the stock market peaks more than twelve months after a yield curve inversion, and in those twelve months, the S&P 500 stages a pretty big rally.

Thus, the yield curve going negative isn’t really a near-term risk. It is more a medium- to long-term warning sign.

The Consumer Is Strong

As stated earlier, the economy is strong right now. But, more importantly, the consumer is strong.

Consumer confidence is sky high. Consumer sentiment is really strong. And consumers are opening their wallets more than they have in the past, with retail sales up a sizzling 6% over the past three months.

Yet, despite this robust spending strength and extreme confidence, consumers aren’t overextended. Household debt to GDP in the U.S. is around 80%, well off the near 100% levels we saw before the 2008 Recession. Moreover, the personal savings rate in the U.S. is presently around 7%, far above where it was leading into the 2008 Recession (3-4%).

In other words, the consumer is very strong right now, and that strength isn’t being fueled by over-leverage. Those are good things.

Bottom Line on the S&P 500

The S&P 500 just hit new all-time highs, and the rally should continue for the foreseeable future, barring a significant black swan event.

Valuations aren’t abnormal after adjusting for growth. Economic and corporate earnings growth is really good. The leaders of the market look strong. The yield curve has yet to go negative. The consumer is strong, doesn’t have much debt and is still saving a bunch.

These are all promising indications that the S&P 500 can head higher over the next several quarters. I reasonably see the S&P 500 hitting 3,000 by the end of this year, and continuing to rally at a moderate rate thereafter.

As of this writing, Luke Lango was long FB, AMZN, AAPL, and GOOG.