Tag Archives: S&P 500

S&P 500 P/E ratio is 24,34 and the bull market is similar to the 50`s

The bull market continues and the S&P 500 went up in April, May, June and July. So, «Sell in May and go away» would be a disaster for any investor on this planet this year. Just like it was in the 50`s under president Eisenhower. This is not a normal situation in the midterm election.

As you can see from the chart below, similar situation happened in 1954 and 1958. Apple Inc is a big contributor to the bullish market right now, and it just hit a $1 trillion market cap. A milestone we have never seen before for a U.S publicly traded company.

Not only Apple Inc are hitting milestones. Many of the stock exchanges around the world are also hitting now all-time highs. But how expensive are the U.S stocks? The P/E ratio of the S&P 500 has fluctuated from a low of around 6x in 1949 to over 120x in 2009.

The long-term average P/E for the S&P 500 is around 15x, meaning that the stocks that make up the index collectively command a premium 15 times greater than their weighted average earnings.

The trailing P/E ration will change as the price of a company`s stock moves, since earnings are only released each quarter while stocks trade day in and day out. Current S&P 500 PE ratio are down -0,13 percent on Thursday 2 August 2018 (based on trailing twelve month) to 24,34.

Some investors prefer forward P/E which is similar to the trailing P/E, but uses estimates of projected future earnings, typically forecast over the next twelve months. If the forward P/E ratio is lower than the trailing P/E ratio, it means analysts are expecting earnings to increase. If it is higher, analysts expect a decrease in earnings.

These measures are often used when trying to gauge the overall value of a stock index, such as the S&P 500 since these longer term measures can compensate for changes in the business cycle.

A business cycle describes the rise and fall in production output of goods and services in an economy. Business cycles are generally measured using rise and fall in real inflation-adjusted GDP, which includes output from the household and nonprofit sector and the government sector, as well as business output.

Output cycle is therefore a better description of what is measured. The business or output cycle should not be confused with market cycles, measured using broad stock market indices; or the debt cycle, referring to the rise and fall in household and government debt.

To put it into perspective. Apple`s P/E is 18,04. Facebook; 24,56. Netflix; 144,43. Amazon; 165,60. Yelp; 625,17. Groupon; 230,15. Godaddy; 227,27. Under Armour; 136,36. Alibaba; 48,25. S&P 500 is 24,34, so how expensive are they all?

It looks like Amazon are expensive, but that company is up 84,75 percent YoY, while Apple with its 18,14 is up only 35,26 percent. Facebook has lost a lot of money in a few days, and the stock is up only 5,45 percent YoY. Estimated P/E for Tesla in 2019 is – 177,68. The stock went up over 16 percent on Thursday.

Investors need to be aware that the P/E ratio can be misleading a lot of times, especially when the underlying business is cyclical and unpredictable. Cyclical businesses have higher profit margins at the peaks of the business cycles. Their earnings are high and P/E ratios are artificially low. It is usually a bad idea to buy a cyclical business when the P/E is low. A better ratio to identify the time to buy a cyclical businesses is the P/S ratio.

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This is the best start for the S&P 500 in nearly 20 years

What a great start of the year 2018. The best weekly gain in more than a year and the bull market continue to surprise many investors. Dow Jones Industrial Average jumped over 25,000 and nearly all of the 100 companies in the Nasdaq rose.

It is also the best start for the S&P 500 since 1999. Analysts forecasts looks pretty good and economic fundamentals are strong enough to lift the stocks higher. President Trump`s tax cut will also be good for the stock market.

It is difficult to find any reasons for a backdrop in the market. A rate hike or two wont stop investors to continue the party. What they really like is Mr Trump`s lower corporate taxes and that will not only help the U.S but also the global economic growth.

U.S stocks are looking good but European stock look even better. A great rally in European stocks so far is based on growth data for the Euro Zone. Services PMI data showed the Euro area was near its best growth in 7 years.

It has been a boost for STOXX 600 and we can thank European banks like Bank Santander and BNP Paribas for that. The outlook for European equities looks good and it is estimated a close to 10% earnings growth in 2018.

 

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Shiny bull. The author has made every effort to ensure accuracy of information provided; however, neither Shiny bull nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Shiny bull and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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What`s next in the stock market?

Take a look at the Silver. Now trading at $17,50! Down another 1,17% only today! Gold is also in a red territory, trading at $1,210,80. Down -0,71% so far today. Copper is trading at $303,95, while Crude Oil (Brent) is trading at 97,20.

This is not what many investors expected. Many was bullish on gold and are still buying with both hands, but the precious metals is declining every day. Yesterday, we saw good economic data. Housing prices are up in the best market in 22 years. What will happen next in the market. Please be sceptical about everything I say, but as an investor I need to predict the market.

SPX Sept 14

Here are some thoughts: The U.S economy can continue to grow with inflation subdued and the interest rates will probably increase next year, but in a gradual pace. Stocks will probably be supported by higher earnings instead of higher valuations. If so, the S&P 500 will continue to go up to about 2,250 next year.

But what if the stock market goes up like I mentioned above and the valuations melt up in the prices of the stocks when the growth remain the same, and at the same time, the dollar keeps going up and remain strong? Then a lot of capital will flow into the U.S market again. Fed will slow down its pace of monetary normalization, and companies support higher stock prices with more share buybacks.

Maybe this is the end? This is the top, and it stops right here. It is the end of the bull market. It is a slowdown in Japan and in Europe and China has a housing bubble that will burst, and all this will stop the whole global economy.

It`s many outcomes, and that`s why it is important to trade what you see, not what you belive. Expect the unexpected, because you`ll never know what`s gonna happen out there, but when it happens, it happens fast.

 

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Shiny bull. The author has made every effort to ensure accuracy of information provided; however, neither Shiny bull nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Shiny bull and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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Russell 2000 vs S&P 500

Japan`s Nikkei fell on friday, dragged down by Sony Corp, Nitto Denko Corp (Apple Inc supplier) and NTT Data Corp. All of them lowered their earnings guidance. Sony had a huge drop last week. European shares rise on hopes of dovish signals from ECB.

The ECB is expected to set a more dovish tone at its policy meeting on Thursday. Many people are scared because we are at an all time high and wonder where to go now. Credit Suisse said it believed equity markets would be significantly higher in 6 and 12 months’ time.

Gold are trading at $1316,70, and it is still above the support at $1300. This presious metal seems to go sideways for a while now. VIX is still low and stock market also seems to trade sideways, but I will take a closer look at it this week.

Janet Yellen wants the FED to work strenuously (like outgoing chair Ben Bernanke) to buy up bonds. She want the money to float into the private market and to increase theoretically available credit. In other words: she wants the money to be “loose”.

So far, this strategy have never been solving any recession problems. I don`t think FED have even one example in the the FED`s 100 year of history where loose money has borne along an economic recovery. She stands for something that have never worked.

The small cap stocks is the sweet spot I am talking about today. The best measure of small caps is the Russell 2000, and it has outperformed the S&P 500 by 2 to 1 over the last three months.

The Russell 2000 is up an incredible 27% over the last 10 months, while the S&P 500 is up “only” 19%. Is the small cap ride over now? Not by a long shot. And remember: 40 small cap stocks will rise 100% today! Take a look at the chart below. I have typed in the Russell 2000 compared to S&P 500.

RUT and SPX

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Shiny bull. The author has made every effort to ensure accuracy of information provided; however, neither Shiny bull nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Shiny bull and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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All time high

Nikkei bounced back on monday and advanced 2,2% after the downturn on friday. Topix rose 1,7% in a light trade with 2,32 billion shares changing hands. The European stocks rose to it`s five year highs today while the dollar is still under pressure. Gold is trading at $1,353,10 an ounce.

The S&P500 is up over 23% YTD. It`s time for Halloween this week, but all the ATH (all time high) are making many people scared, but that is not because of the Halloween. It is simply because the market is overbought.

Take a look at the S&P500 shart below. How many ATH can you count in that chart? You see? The world is going up and forward. Will this megatrend stop? If USA is like Japan twenty years ago, it will stop. They did never come back to it`s top. Take a look at the chart.

SP500_1955

The next months are the favorite months for many investors. If you look back over the past 60 years, the Wall Street results have been dominated by this very productive season.

You have probably heard the word October effec, the year-end effect or the January effect. Historically, November has been the second-best month of the year for the S&P500 and the third best for the Dow since 1950. It has also been the start of the most bullish months of the year, which extend to April.

You have also heard the word: “Sell in may and go away.” But sometimes it isn`t like that. Sometimes we see things are not going the way it should. You can rely on this as the forth and crucial element of the Quadruple Witching Season. Like the one that is sitting on top of other catalysts like the tide lifting all boats, but don`t forget stop loss, simply because what goes up, must come down.

50% of the companies on S&P500 have reportet their Q3 results and some of them have exceeded the investors expectations which made the rally we have seen so far in October. Today it is headed for Apple, and wednesday it is time for Facebook earnings. I look forward to both of them.

Pending Home Sales at 10:00am. (Forecast: 0,5%. Previous: -1,6%).

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Shiny bull. The author has made every effort to ensure accuracy of information provided; however, neither Shiny bull nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Shiny bull and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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