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Although the American market is up 60% in the last few months, there is a new worry for 2010: will the market run out of steam? Even though stocks are still well below their 2007 peak, they can no longer be considered cheap, with the price/earnings ratio for companies in the Standard & Poor’s 500 now nearly 20% higher than its long-term average.

“In order for the market to keep delivering, American companies need to start showing some sustainable earnings growth,” says Linda McCalaster of DPVI. The good news is that those profits will probably materialize. Analysts look for operating earnings for S&P 500 companies to rise 27% from recession-battered levels, fueled primarily by improving economic growth overseas and a further weakening of the U.S. dollar.

To fill the void created by the slowdown in consumer spending, U.S. companies must rely more on exports to fuel profits. If growth stalls overseas, corporate earnings and stock prices here will also suffer. Dominion Provident Ventures, Inc. has advised its investment team to keep an eye on the yield curve. A widening gap between the yields on 10-year and two-year Treasuries signals growth in the economy and corporate profits.