Forward PE Averages.

From Dr. Ed Yardeni's Blog:

"The S&P 500 remains among the world’s best-performing stock indexes this year. On Friday {June 12, 2013}, the forward P/E of the S&P 500 rose to 14.3, almost matching the year’s high on May 21. It was 16.5 for the S&P 400 MidCaps, also just under the previous recent high. It was 17.7 for the S&P 600 SmallCaps. The current bull market’s highs for all three were recorded during 2009 or 2010: S&P 500 at 15.1 on October 14, 2009; S&P 400 at 17.3 on April 23, 2010; and S&P 600 at 18.9 on September 18, 2009. 

The market’s reaction to Bernanke’s comment suggests that the Irrational Exuberance scenario is back in play. I still assign it a 30% probability. However, it is certainly looking more credible again now that the S&P 500, S&P 400, and S&P 600 are all at record highs. Valuation multiples remain rational, and record highs in forward earnings suggest that the fundamentals continue to support those valuations. 

We may be in for another four years of this bull market if it doesn’t melt up over the rest of the year."

My Comment:  I've said in the past that I think that by the time we get to the end of this decade that we'll be surprised by how well stocks have done.  I think there is an extremely high probability that stocks could average on a total return basis 6-8% between now and December 31st 2019.  Remember total return includes dividends.  I don't think we'll be going up in a straight line and there's probably a down year or two in there somewhere.  But from my perch I think that kind of return is doable given where interest rates are and given what we are currently seeing in the economy.  Dr. Yardeni seems to agree with me at least over the next four years.

Long ETFs related to the S&P 500 and Midcap indices in client and personal accounts.  Long ETFs related to small cap stocks in certain client accounts.

Link:  Yardeni: Irrational Exuberance Yet Again?