The S&P 500 and Its Earnings

Here’s a look at the S&P 500:

The chart follows a logarithmic scale. (If I were smarter, I’d know how to make a logarithmic chart in Excel where I could zoom in on my high and low points. Since I can’t, this will have to do.)
The black line is the S&P 500 and it follows the left scale. The blue line is earnings and it follows the right scale. Where the lines intersect is a P/E ratio of 15.85 (which is 10^1.2).
In my opinion, this really wasn’t a valuation bubble where valuations overshot prices. Instead, the fundamentals tumbled beneath prices.

Posted by Eddy Elfenbein on February 12th, 2008 at 1:15 pm

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