Valuation

The S&P currently trades with a  price to earnings ratio {PE} around 14.90 and a 6.7% earnings yield on our year end midpoint earnings estimate of $106.50.  Our year end 2014 earnings estimate for the S&P 500 is currently between $112-114.  If we use a midpoint of $113 for 2014, then the S&P trades around a 14 PE and a 7.1% earnings yield.  The ten year Treasury trades around a 2.60% yield.  It has been this parabolic rise in interest rates that has been one of the primary drivers of the stock sell off. The S&P 500 currently trades within our expected cone of probability  of 1,490-1,700.

I mentioned last week and previously discussed  back in April the possibility of raising my earnings estimate for 2013.  I will wait until we see 2nd quarter earnings before making any changes.   Right now given how quick interest rates have risen I think I'm unlikely to fool around with these estimates at this time.  With earnings season kicking off in earnest July 8th it's prudent to leave these alone at this time.

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