Quote:
Originally Posted by CoachKandSportsguy
Here's S&P's S&P 500 forward GAAP earnings estimate from the S&P website:
Q2 2022: $42.53
Q3 2022: $49.23
Q4 2022: $51.25
Q1 2023: $50.87
Total: $193.88, round to $194
Current level: 4200
1) P/E 15x put the S&P 500 @ 2900
2) Assuming that the earnings are always beat,
by 5% on average due to share repurchases,
($194 x 1.05) =$204 x P/E 15 = @3100
2) Assuming that the earnings are always beat,
by 10% at the extreme due to under forecasting for an intentional beat
($194 x 1.10) =$213 x P/E 15 = @3200
Will the market go straight down to that level? No, it goes down in staggered drops and rallies, like stairs. If you assume that all information is in the market, then why is the P/E so high as compared to average growth, when inflation is elevated, there are shortages in mfg and labor?
Here is a comparison of the current market and the decline in the GFC in the 2000's. note the similarity in the stair steps down.
Don't be Irving Fisher, "Stocks have reached what looks like a permanently high plateau." any guess when he said that? Just be patient, prices will return to normal levels if not lower
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Just some thoughts...
PE at 15... why? That might be an assumption for the market of yesteryear. Lots of things have changed. 18 and 21 are common numbers. At $4200 is 21.
6 month projection... Why? TOTV readers are long-term investors. And the market is forward looking one to five years.
Don't count on stock buy backs. The Brandon Bill taxes buy backs. Businesses will change their behavior.
I never did understand relying on charts of past data. Business is always evolving and very much moves on emotional behavior, especially in the short term. Maybe that behavior is reflected in past charts, I don't know. I really think the biggest pressure on the market right now is expectations for the upcoming election.
I am an MBA and MSIB (MS International Business)... not looking to argue, but explore ideas.