At Least Valuations Have Gotten Better

Earnings have gotten better while the market has tanked.  When this happens, you get P/E contraction, and as shown below, the trailing 12-month P/E ratio has dropped significantly in recent weeks.

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Comments

[Graham Turner]

Hello Mr Hickey
I am not quite sure where you access your data from. The latest Ned Davies Research estimates S&P 500 earnings for end Dec 2009 at $46.39 which would put the market on a P/E of 23.9.
Its 12 month forward estimare is for earnings of $53.02 giving a forward P/E 20.1.
If one accepts the 10 Year Trailing Average of nearer $60 the P/E then drops to 17.7.
The long run average P/E multiple is 17 times (an S&P target level of 789 based on 12 month trailing earnings) but for "bargains" the multiple has often fallen to 12 times or less.
Which on any measure you care to use is still some way off.
Lets wait until Bearish Sentiment is at least twice Bullish Sentiment then we will be much closer to a trading entry point.
Regards G Turner.

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