an tSionna

The highlighted post below is from the blog  Crossing Wall Street.  {So is the chart above.}

"One of the paradoxes of this market is that stocks have climbed higher even as earnings estimates have come down. Consider that the S&P 500’s earnings multiple is up nearly 30% since the market’s low nearly one year ago.

I think part of the reason for the increased valuation is that the economic uncertainty has started to fade. The Federal Reserve’s move last week probably helped clear up some of that uncertainty.

What’s interesting is that despite the higher valuation’s, the S&P 500’s Price/Earnings Ratio is still lower now that it was at any point from March 1995 to October 2008. And except for some brief periods, the market’s P/E Ratio is currently lower than it was during the vast majority of the time from 1991 to 2010."

Low valuations have been a backstop for our investment thesis most of this year.  In some ways that is still the case.  Irrespective of the market's big move in the past few months, stocks are still trading at around 14 times our end of year market estimate and trade with a 7% earnings yield with a 2% dividend in an environment where 10 year treasuries yield under 2%.

I spent quite a bit of time trying to parse through my brain the implications of the Federal Reserve's move last week.  I know I promised you something more in depth today on last week's action.  This is not that piece.   Part of the time frankly over the weekend when I would have spent time working on this was devoted to dealing with something horrible that has happened to a personal friend of mine.   Posting may be a bit sporadic this week depending on how that event unfolds.  I will try to get the article I discussed with you last week out a bit later today or tomorrow but no promises.

In the meantime I ask you to keep my friend and his family in your thoughts and prayers.

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