Latest note at Seeking Alpha discussing my latest look at S&P 500 earnings and broad market outlook as compared to current estimates of future earnings:
- 93% of companies in the S&P 500 have reported earnings with current TTM As Reported EPS (AREPS) at $87.66, reflecting a decline of 2.4% on an inflation adjusted basis; peak cycle earnings on an inflation adjusted basis remain at $89.97 set in February of 2012.
- 10-year Cyclically Adjusted Price-to-Earning (CAPE) based on recent S&P 500 prices stands at 24.0X compared to 21.8X a year ago; multiple expansion driven by a year-over-year price index increase of 17.6%, offset by 9% growth in CAPE earnings.
- Forward earnings expectations reflect outsized growth of 25.5% and 22.9% on a nominal and real basis, respectively; this is in stark contrast to the recent deceleration of recent earnings relative to its 10-year trend.
- Aggressive monetary policy remains the major catalyst supporting a constructive outlook on the equity markets and likely already discounted based on elevated valuations.
- Recent earnings trends, questionable economic data, and imbalances in the financial and economic landscape suggest current growth expectations will not be met and risks remain to the down side.
- Despite recent strength in defensive sectors, investors should be selective and focus on higher quality names with long track records of dividend and earnings growth through entire business cycles
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