Valuation 09.13.14

I said last week that we would take a deeper look at the market.  Today we'll tackle valuation.   As of this writing the S&P 500 is trading at 1,985.  The S&P 500 has added just under 2% since we last looked at valuations on 06.25.2014.  This is a bit misleading however as stocks also staged a 4-5% decline back in August and have basically traded in place since around the 4th of July.  {See our previous post below this one on this subject.}  Below is our current analysis.

Our Midpoint S&P 500 Earnings Estimate of $118.75 {Through 12.31.2014}

Current PE:                     16.71

Earnings Yield:               5.98%

Dividend Yield:               1.80%

Rolling Four Quarter Estimate  $125.80 {Through 009.13.2014 via Fundamentalis.com}

Current PE:                   15.77

Earnings Yield:               6.33%

Dividend Yield:              1.86%

Current Expected Price Cone of Probability,   09.13.2014:   1,700-2,100.

The current yield on the 10 year US Treasury is 2.38%.  

The Cone of Probability is our current assessment of the trading range within which we think stocks have the potential to trade during the described time period.  It is a probabilistic assessment based on a many factors.  Some of these inputs are: Earnings estimates, also are those estimates rising or falling, dividend yield, earnings yield and the current yield on the US 10 year treasury.  This is not an exhaustive list of all of the variables that are used in creating the cone.  The Cone of Probability is used solely for analytical purposes.  It will fluctuate with market conditions and changes to the data inputs.  Index prices can and have traded outside of the range of the cone.  The data supplied when we discuss the cone is for informational use only.  There should be no expectation that this price range will be accurate and there are no guarantees that this information is correct.

*Long ETFs related to the S&P 500 in client accounts, although positions can change at any time.