The S&P 500 and Its Earnings

Here’s the S&P 500 along with its trailing operating earnings.

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The black line is the S&P 500 and the gold line is the trailing operating earnings. The S&P 500 follows the left scale and the earnings are on the right. The two lines are scaled at a ratio of 16 to 1.

The future part of the earnings line is Wall Street’s consensus (you can tell how it gets smooth all of a sudden). Those estimates are almost always too high. Wall Street currently expects earnings of $120 for the S&P 500 this year, and $137 for 2015. If the index trades at 16 times next year’s earnings by the end of next year, then the S&P 500 would be at 2,200. That’s a gain of 17.5% over the next 19.5 months.

Posted by on May 16th, 2014 at 10:47 am


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