Valuation {09.19.19}

With the markets again near all time highs and headed higher at the open today we'll review our valuation analysis.

The S&P 500 closed yesterday at 3005.90  which is an advance of 20.32% for the year, not including dividends.  This represents an advance of approximately 0.35% from when we last reviewed these numbers on  July 19, 2019.  Below is our current valuation analysis.  We are still using a 168.00  earnings estimate for year end 2019.     We are currently using a mid-point $172.00  for a rolling estimate out  to the end of Q3, 2020 {down from $173.00}.    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 {Year End 2019}

Current PE:                       17.90% {PE has increased from previous review of 17.82%}
Earnings Yield:                   5.61% {Unchanged}
Dividend Yield:                  1.85% {Yield basically unchanged}

Current Expected Price Cone of Probability {COP}:   2,500-3,000 for 2019.  2,700-3,250 for 2020. 

Rolling Four Quarter Estimate for the S&P 500, Our Midpoint Estimate $172.00:

Current PE:                     17.47%
Earnings Yield:                 5.72%
Dividend Yield:                1.91.% {Estimated}

The current yield on the 10-year US Treasury is 1.796%.  That is a decrease from our last update when the 10-year US Treasury was yielding 2.055%.  {When we updated these same statistics last November the 10-year rate was 3.07%.  10-year rates are down over 125 basis points or over 1.25% since then.  That helps explain the underlying support for stocks this past year even as earnings have basically remained stagnant.}

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 Monday.