The S&P 500 and its Earnings

Here’s an updated look at the S&P 500 and its earnings line. The index is the black line and it follows the left scale. The earnings line is yellow and it follows the right. The future part of the yellow line is based on Wall Street’s consensus.

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The two lines are scaled at a ratio of 16-to-1 so whenever the lines cross, the market’s P/E Ratio is exactly 16. I don’t mean to imply that’s fair value. The graph simply works best at that ratio.

Posted by on September 15th, 2015 at 1:25 pm


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