SP 500 Weekly Earnings Update

Thomson Reuters IBES data (by the numbers): 

Fwd 4-qtr est: $163.80 vs last week’s $164.11

P.E ratio: 16.6x

PEG ratio: 0.78x

SP 500 earnings yield: 6.02%

Year-over-year growth of forward estimate: +21.4% vs last week’s 21.75%

Commentary: This week we saw a slight dip in both quarterly bottom-up estimates as well as the forward 4-quarter estimate for what could be any number of reasons: the stronger dollar (roughly 40% of SP 500 revenue is non-US), trade comments, etc. etc.

Thomson did not publish their weekly “This Week in Earnings” so we used the “Earnings Scorecard” to sum the quarterly SP 500 earnings estimates to arrive at the forward estimate. (The “forward 4-quarter estimate” is the sum of the quarterly bottom-up estimates from Q2 ’18 through Q1 ’19).

The SP 500 “earnings yield” remains over 6%.

There were a number of different stories this week: the bond market rally, the news about imported auto tariffs, the turmoil in the Italian bond market, the slowdown of the European economy, and probably a few others.

In July, 1997, the Malaysian Ringgit and the Thai baht collapsed, throwing those economies into acute turmoil and it was a headline for a week, faded for a month or two, and then gradually became worse as the “Asian Contagion” spread across that part of the world, ultimately culminating a year later in the Long-Term Capital Management Crisis in August – September, 1998.

The point being that you (we) never know what kind of seemingly small and immaterial disruption can evolve into something quite major for the markets.

More commentary to come over the weekend.

Thanks for reading.

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