The median price/earnings ratio of the Russell 3000 is currently 16.6x 2010 earnings.  The median forward PE for the Russell 1000 is 16.8x.  The median forward PE for the Russell 2000 is 16.5x.

The long-term average forward PE is 14x.  Thus, the average stock is somewhat expensive but not egregiously so.

However, profit margins are above long-term averages.  If profit margins revert to mean, then stocks are more expensive than they appear. 

Margins matter more in the long-run than the short-run, though.  Thus, over the near-term, valuation is not worrisome.