an tSionna {03.25.13-Comparing Valuations}

I posted this chart last fall from JP Morgan showing the S&P 500 as it neared record highs.  If this chart was updated we'd see the S&P 500 ready to open just a bit under 1560.  Let's compare valuations at this level with the levels we saw the last two times we made it this high.  For current estimates I will use my earnings midpoint target of 106.50.

March 2000:   S&P 500 = 1,527,  Forward PE = 25.6,  Dividend Yield= 1.1%,  Earnings Yield = 4.7%
10 Year Treasury Yield = 6.2%

Oct. 2007:      S&P 500 = 1,565,  Forward PE = 15.2,  Dividend Yield= 1.6%,  Earnings Yield = 6.5%
10 Year Treasury Yield = 4.7%

Current:         S&P 500 = 1,560,  Forward PE = 14.6,  Dividend Yield= 1.9%,  Earnings Yield = 6.8%
10 Year Treasury Yield = 1.9%

Traditional*: S&P 500 = 1,560,  Forward PE = 16.3,  Dividend Yield= 1.5%,  Earnings Yield = 5.2%

*S&P 500 based on traditional valuation metrics would place fair value based on my earnings estimates between 1,730-1,900 right now!  There is no reason to believe that we are going back to those levels any time soon or ever.  But it is a base line way to measure where we are versus where we could be assuming that the economy continues to improve and nothing unexpected washes over our shores.

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