Valuation (1.31.19}

The S&P 500 closed yesterday at 2,683.8 which is an advance of about 7.44% for the year.   This also represents a gain of about 1.81% from when we last reviewed these numbers back on November 11, 2018.  Below is our current valuation analysis.    Current Street estimates for the S&P 500 have come down significantly for 2019 and are around 170.00  At this point we are using a number of 168.00 for the S&P 500 for 2019.  We will basically split the difference for this analysis and use a midpoint average of 168.75  for this analysis.  We are currently using a mid-point $178.70 for a rolling estimate out  to the end of 2020.    We also use a simple color code to give you some reference for these numbers.  Green will indicate that the valuation on the index on a strictly historical basis has become more attractive from the last time we did this review.  Red will indicate the opposite.  Black means unchanged.

Our Midpoint S&P 500 Earnings Estimate of $168.75. {Year End 2019}

Current PE:                       15.90% {PE has increased from previous review of 15.02}
Earnings Yield:                   6.29% {down from previous review of 6.65%}
Dividend Yield:                  2.06% {Yield has advanced from previous  1.92%}

Current Expected Price Cone of Probability {COP}:   2,500-2,875 for 2018.  2,700-3,050 for 2019. 

Rolling Four Quarter Estimate for the S&P 500, Our Midpoint Estimate $178.70:

Current PE:                     15.01% 

Earnings Yield:                 6.07% 
Dividend Yield:                2.06.% {Estimated}

The current yield on the 10-year US Treasury is 2.73%.  That is a decrease from our last update when the 10-year US Treasury was yielding 3.07%.  

The Cone of Probability {COP} 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    We reserve the right to change these investments without notice on this blog or via any other form of verbal, written or electronic communication.

Back early next week.  

I will be updating this monthly in 2019.