SP 500 Weekly Earnings Update: SP 500 “Earnings Yield” Back Down to 5.20%

The SP 500 earnings yield has retreated again down to close to 5% at 5.20%.

This level is always worrisome.

Here is the article from last December ’19 on the low SP 500 earnings yield.

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SP 500 Earnings data (format revised):

  • Fwd 4-qtr est: $175.75 vs last week’s $175.98
  • 1-year fwd est rate of change: 4.21% vs last weeks 4.26% and the peak print since Nov 1 of 4.46% two weeks ago.
  • PE ratio: 19.2x
  • TTM est: $164.53 vs last week’s $164.30
  • Fwd est / TTM est: $175.75 / $164.53 = 6.82% vs last week’s 7.11%

Readers should comment on the new format and whether the data is helpful or not.

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Looking at 2020 bottom-up quarterly estimates for SP 500:

 

 

Click to open

 

Note the expected acceleration in Q3 and Q4 ’20 bottom up estimates, both over $46 per share.

Someone is looking for a stronger 2nd half to 2020. Note the dollar estimates of Q3 and Q4 of 2020 to the first half of 2020 and all of 2019.

Note the upward revision to Q4 ’20’s dollar estimate. I wonder if there is an indirect “election call” being made ?

Summary / conclusion: An earnings yield drifting down towards 5% always makes me nervous. If a longer article was done on the SP 500 earnings yield post 2008, it would show that it has rarely been this low the last 10 – 12 years.

The Nasdaq 100 is up 10.36% YTD and the SP 500 is up 4.89% YTD. (Source: Bespoke).

A much longer blog post today was written but it was somehow “flushed” when it was posted. Nothing like wasting 2.5 hours.

More to come over the weekend.

Thanks for reading.

My personal email is brianglm@trinityasset.com.

 

 

 

8 Responses to “SP 500 Weekly Earnings Update: SP 500 “Earnings Yield” Back Down to 5.20%”

  1. Mark Russell

    Thanks Brian, I appreciate your hard work and consistent insightful reporting…

    Reply
  2. Mike Mickelson

    revision appreciated but what qtr does the forward est. and TTM start with?

    I have no idea how to understand your table 2020 bottom-up quarterly estimates for S&P500. what are the col. headings?

    Reply
    • Brian Gilmartin

      Let me look at that Mike. i’ll make it clearer. The “fwd 4-qtr” today is basically calendar 2020. The TTM est is baiscally calendar 2019 and the reason it’s an “estimate” is that q4 ’19 earnings are still being reported.

      Reply
  3. Robert Lee

    If you examine the earnings yield compared to BBB/BAA, the yield actually looks high. Likewise if you look at it from a risk premium perspective spread to 10yr Treasury yield. I think either credit is cheap or equities are cheap. Given how implied vol has come down, it would seem that equities are cheap (on a relative basis). Just a thought

    Reply
  4. Gerry Ledford

    (This is for the author, no need to publish it.) The format is much clearer, thank you. I had to do a lot of rereading to figure out which number I was looking for in the previous format; this is a snap. By the way, I read the blog every week.

    Reply

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