Chart: Earnings

From Chart of the Day: 

With third-quarter earnings largely in the books (96% of S&P 500 companies have reported for Q3 2010), today's chart provides some long-term perspective to the current earnings environment by focusing on 12-month, as reported S&P 500 earnings. Today's chart illustrates how earnings declined over 92% from its Q3 2007 peak to Q1 2009 low which brought inflation-adjusted earnings to near Great Depression lows. Since its Q1 2009 low, S&P 500 earnings have surged (up over 900%) and have just crossed above a level that occurred at the peak of the dot-com bubble. In fact, earnings have only been higher than current levels for a 29-month stretch that occurred at the tail end of the credit bubble.

My comment:  Earnings for next year in the S&P 500 are starting to look like they will be somewhere between $90-95 dollars per share.  If we take a midpoint number of say $92 then S&P valuation is likely anywhere from 1200 {13 times that number} to 1425 {roughly 16x S&P estimates for 2011}.  The latter may be too aggressive but it is possible to think of a year end 2011 target of between 1350 and 1400.  That is a possible 11-17% price appreciation potential for next year.  Not saying it will happen but it is an indication of what current estimates suggest could occur!

Link:  Chart of the Day: Earnings.

*Long ETFs related to the S&P 500 in client and personal accounts.