Valuation

A little holiday reading:  Bloomberg: S&P 500 in Cheapest Bull Market Since Ronald Reagan

I'll leave you with this excerpt from the article and a thought:

"While the S&P 500 has doubled since Obama first took office, the index’s price-earnings ratio was lower than the 16.4 six-decade average for 38 of the rally’s 46 months, as earnings surged, data compiled by Bloomberg show. The multiple is up 35 percent since March 2009, compared with the average expansion of 55 percent in bull markets since 1962, Bloomberg data show. For the past 2 1/2 years, the S&P 500 hasn’t climbed higher than 16 times earnings, compared with the average ratio of 17.4 in past rallies.  The valuation rose to a high of 13.8 from 7.3 during the first 15 months of the 1982 advance that pushed the S&P 500 up 229 percent, according to data compiled by Bloomberg. In the 1990s rally led by technology companies, it almost doubled to 28.5 during the eight years."

A market that would trade at 16 times this years earnings would be worth 1660 on my year end 103.75 estimate.  Using a preliminary midpoint for next year would give you the potential to see stocks close at 1720.  I don't think we're going to be at 1660 by the end of this year and 1720 seems aggressive for next year.  However it does show you what stock's potential could be if we could ever get confidence to return to this market.  

See you Monday!

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