Earnings Outlook

Thomson Reuters points out this week that 3rd quarter S*P 500 earnings {excluding JP Morgan} are expected to grow 4.2% over same quarter last year and 69% of these companies are reporting earnings above analyst expectations.  At the same time only 53% of companies are reporting revenue above expectations.  This highlights that growth is still hard to come by.  The forward rolling four quarter PE is 14.9%  That implies earnings out to then of 118.21.  The current PE for the S&P 500 is about 16.5%.  That's pretty much in line with historical averages and implies a current earnings yield of around 6.1%.  

Taking that PE out a year on that 118.21 estimate implies fair value for the S&P 500 of around 1,950. , assuming those earnings gains materialize.  That's potentially a 10% gain from where we trade right now out to then.  Keep in mind that I think that earnings estimate is a tad aggressive.  

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