Valuations
Noting much on the news front today. Mr. Bernanke speech yesterday stirred up the markets sending U.S. dollar up, and treasuries down. The rhetoric is unchanged, the highlight is that the FED is ready to tighten the monetary policy when the economy starts to recover. Bloomberg link: Bernanke Ready to Tighten When Recovery Sufficient.
Only interesting thing today is research report by David Rosenberg of Gluskin Sheff + Associates Inc. I find Mr. Rosenberg one of the most brilliant strategist and economists at the moment. The report in named “A “V”-Shaped Recovery” and main theme is current S&P 500 valuation. You can subscribe on his research on the following link.
According to the report the forward P/E on the S&P 500 is at a five-year high of 16.2x; the operating trailing P/E multiple on the S&P 500 is at 27.6x; the reported trailing P/E multiple on the S&P 500 is at 140x. Most intriguing paragraph is the following:
All that can really be said is that going back 60 years, there have only been 14 months when the trailing multiple was as high as it is today, and that covers 10 recessions. This implies that the market is in the top 2% expensive terrain historically, and those other times basically covered the tech mania of a decade ago.
The S&P 500 is priced for $83 earnings and the current consensus is at $48. A lot of reason for a some kind of a correction, but it remains to be seen whether we will have one.