I decided I'd update our valuation analysis given the declines we've seen in stocks in May
The S&P 500 closed yesterday at 2,843.49 which is an advance of about 13.84% for the year, not including dividends. However this represents approximately a 2.2% decline from when we last reviewed these numbers on April 17, 2019. Below is our current valuation analysis. We are are now using a 168.00 earnings estimate for year end 2019. We are currently using a mid-point $173.00 for a rolling estimate out to the end of Q2, 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 {Year End 2019}
Current PE: 16.93% {PE has decreased from previous review of 17.20%}Earnings Yield: 5.91% {up from previous review of 5.819%}Dividend Yield: 1.84% {Yield basically unchanged}
Current Expected Price Cone of Probability {COP}: 2,500-3,000 for 2019. 2,700-3,250 for 2019.
Rolling Four Quarter Estimate for the S&P 500, Our Midpoint Estimate $173.00:
Current PE: 16.43%
Earnings Yield: 6.08%
Dividend Yield: 1.92.% {Estimated}
The current yield on the 10-year US Treasury is 2.121%. That is a decrease from our last update when the 10-year US Treasury was yielding 2.59%.
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. We will likely next update our valuation review in late July or early August.
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