• 2 hours Gold Mid-Tiers Rally On Fresh Earnings Reports
  • 20 hours Can The British Pound Overcome Brexit?
  • 1 day Is A Gold Breakout Near?
  • 2 days Federal Reserve Downgrades U.S. Growth And Cuts Rate Hikes
  • 2 days Disney Beats Out Comcast In $71.3B Mega-Merger
  • 2 days The Feds Continue To Prop Up Equities Markets
  • 2 days Bejing's Sway In South China Sea Is Fading
  • 3 days Saudis Eye Billions As Stocks Get Emerging Market Boost
  • 3 days Airbnb In Acquisition Mode Ahead Of IPO
  • 3 days Gold Hangs At $1,300 Ahead Of Fed Meeting
  • 3 days Champagne Sales Slow As European Economic Worries Grow Louder
  • 4 days Putin Signs “Digital Iron Curtain” Into Law
  • 4 days Russian Metals Magnate Sues U.S. Over Sanctions
  • 4 days Tesla Looks To Jump Into Indian Market
  • 4 days Global Banks Lay Groundwork To Re-Inflate Asset Prices
  • 5 days Homeowners Experiment With Risky New Investment Trend
  • 5 days U.S. Tech Stocks Look Increasingly Vulnerable
  • 5 days De Beers To Expand World’s Most Profitable Diamond Mine
  • 5 days Ford CEO Gets Raise After Massive Layoff Round
  • 6 days Germany’s Flirtation With Recession Could Cripple The Global Economy
The Chatroom Cartel Running Global Bond Markets

The Chatroom Cartel Running Global Bond Markets

Eight major banks have been…

Lending: The Good, Bad, And Ugly

Lending: The Good, Bad, And Ugly

Aristotle said, “The most hated…

  1. Home
  2. Markets
  3. Other

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