"No warning can save people determined to grow suddently rich" - Lord Overstone

  • 34 mins Four Tips From The World’s Top Investors
  • 1 day The Dark Side Of Trump's Tax Bonanza: $1 Trillion In Debt
  • 2 days How Goldman Made $200M In A Day
  • 2 days Why Trading On Trump's North Korea Misstep Won’t Work
  • 2 days Samsung Loses $539 Million In Battle Against Apple
  • 2 days Is There Upside Potential For Gold Juniors?
  • 2 days World's Top Diamond Jeweler Joins De Beers' Tracking Initiative
  • 2 days Cryptocurrencies Bounce Back But Struggle With Key Resistance Levels
  • 3 days Millennials Are Waiting For A $30T Inheritance That Might Not Come
  • 3 days Is This the Tipping Point for American Credit Card Debt?
  • 3 days Tech Icon Predicts A Big Future For Ethereum
  • 3 days Apple Doubles Down On Data Privacy
  • 3 days Where To Look As The Treasury Bond Bull Run Loses Steam
  • 3 days The Tech Giants Poised For A Breakout
  • 3 days The U.S. Dollar Is Set To Continue Its Rally
  • 3 days Bitcoin Plummets On Price Manipulation Investigation
  • 4 days The Multi-Billion-Dollar Business Of Influence Peddling
  • 4 days Goldman Backed ‘Stablecoin’ Hopes To Curb Crypto Volatility
  • 4 days Consumers Lost $1.6M To Crypto Fraud In Australia
  • 4 days Facebook May Soon Become A Paid Service
How Goldman Made $200M In A Day

How Goldman Made $200M In A Day

The thought of a stock…

The Tech Giants Poised For A Breakout

The Tech Giants Poised For A Breakout

Bullish sentiment seems to have…

Stock Market Valuation and Sentiment at Extreme: SP 500 Total Earnings Same as 2013 and Index Up 40% Since

Earnings per share for S&P 500 are up 6.6% since the end of 2013, all the gain is due to share buyback, while the total reported earnings are the same (see Fig. 1).

If the total earnings are the same as 3 years and 10 months ago without a recession we can say that we are operating in an essentially flat earnings environment. During the same period the index is up 40%. The only reason that earnings are up for the past 12 months is that earnings per share went down almost 20% since the end of 2014 to August 2016.

A much worse picture of market valuation emerges if we look at the Market Cap to GDP Ratio. Fig. 2 shows the ratio of total market cap of S&P 500 companies to the GDP. If we include all the public companies the ratio is between 140-150%. The only period when the market valuation was more extreme than today was during 1999-2000.

The sentiment with Bulls at 62.3 and Bears at 15.1 and VIX below 10 is at an all-time extreme in terms of bullishness. Fig. 3 shows the Complacency Index at a new high. All this doesn’t mean that the market will go down tomorrow or in a near future, but all it says is that risk has risen to a historically high level.

Major Indices Weekly Charts Chart
Larger Image

 

Back to homepage

Leave a comment

Leave a comment