{"id":7667,"date":"2018-04-07T13:07:55","date_gmt":"2018-04-07T13:07:55","guid":{"rendered":"https:\/\/fundamentalis.com\/?p=7667"},"modified":"2018-04-07T13:07:55","modified_gmt":"2018-04-07T13:07:55","slug":"sp-500-earnings-yield-remains-elevated-a-good-thing","status":"publish","type":"post","link":"https:\/\/fundamentalis.com\/?p=7667","title":{"rendered":"SP 500 Earnings Yield Remains Elevated &#8211; A Good Thing"},"content":{"rendered":"<p>Here is the chronology of the SP 500 &#8220;Earnings Yield&#8221; since the week of February 9th, 2018, when the stock market suffered the volatility crash:<\/p>\n<ul>\n<li><em><strong>4\/6\/18:<\/strong><\/em> 6.22%<\/li>\n<li><em><strong>3\/30\/18:<\/strong><\/em> 5.99%<\/li>\n<li><em><strong>3\/23\/18:<\/strong><\/em> 6.11%<\/li>\n<li><em><strong>3\/16\/18:<\/strong><\/em> 5.75%<\/li>\n<li><em><strong>3\/9\/18:<\/strong><\/em> 5.69%<\/li>\n<li><em><strong>3\/2\/18:<\/strong><\/em> 5.88%<\/li>\n<li><em><strong>2\/23\/18:<\/strong><\/em> 5.75%<\/li>\n<li><em><strong>2\/16\/18:<\/strong><\/em> 5.75%<\/li>\n<li><em><strong>2\/9\/18:<\/strong><\/em> 6.00%<\/li>\n<\/ul>\n<p>Source: internal spreadsheet tracking SP 500 earnings data.<\/p>\n<p>The SP 500&#8217;s &#8220;earnings yield&#8221; is higher as of Friday, April 6th, than February 9th, even though the SP 500 (denominator) is higher since the forward 4-quarter estimate has risen all quarter.<\/p>\n<p>The last time the SP 500 earnings yield was above 6% was October, November &#8217;16 just prior to the Presidential election:<\/p>\n<ul>\n<li><em><strong>11\/11\/16:<\/strong><\/em> 5.93%<\/li>\n<li><em><strong>11\/4\/16:<\/strong><\/em> 6.05%<\/li>\n<li><em><strong>10\/28\/16:<\/strong><\/em> 6.07%<\/li>\n<li><em><strong>10\/21\/16:<\/strong><\/em> 6.03%<\/li>\n<li><em><strong>10\/14\/16:<\/strong><\/em> 6.06%<\/li>\n<li><em><strong>10\/7\/16:<\/strong><\/em> 6.01%<\/li>\n<li><em><strong>9\/30\/16:<\/strong> <\/em>5.77%<\/li>\n<\/ul>\n<p><em><strong>Conclusion:<\/strong><\/em> In <a href=\"https:\/\/fundamentalis.com\/?p=7659\">last night&#8217;s blog post<\/a>, it was questioned whether Q1 &#8217;18 earnings, which start this week with the big banks and other Financials this coming Thursday and Friday, can be a market catalyst and the thought was the Q1 &#8217;18 earnings gains are likely in the market already, but given the SP 500 earning yield over 6% this last 9 weeks, the SP 500 can rally simply because it remains relatively cheaper than it has been since late 2016.<\/p>\n<p>There is a constant litany of &#8220;the stock market (i.e. SP 500) is expensive&#8221; heard every week since the March &#8217;09 lows, thus it becomes somewhat challenging to remain a longer-term optimist on stock prices.<\/p>\n<p>The high for the SP 500 on January 26th, 2018 was 2,872.87. The close for the SP 500 on Friday, April 6th was 2,656.88 for a loss of 7.5%.<\/p>\n<p>This is still a pretty normal correction and something not seen since Q1 &#8217;16, when the SP 500 corrected roughly 15% from the July &#8217;15 high to the February &#8217;16 low.<\/p>\n<p>Looking at the &#8220;average&#8221; SP 500 earnings yield in the first two months of 2016, when crude oil was falling to $28 and credit spreads had blown out, the &#8220;average 8-week yield&#8221; was 6.54%, not much more than today.<\/p>\n<p>Remember, the President&#8217;s tariff battle with China is subject to a 6-month &#8220;public consultation&#8221; period &#8211; nothing is policy yet. This is &#8220;posturing\/negotiating by headline&#8221; right now.<\/p>\n<p>Thanks for reading.<\/p>\n<p>&nbsp;<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Here is the chronology of the SP 500 &#8220;Earnings Yield&#8221; since the week of February 9th, 2018, when the stock&hellip;<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[162],"tags":[],"class_list":["post-7667","post","type-post","status-publish","format-standard","hentry","category-sp-500-earnings-yield"],"jetpack_featured_media_url":"","jetpack_sharing_enabled":true,"post_mailing_queue_ids":[],"_links":{"self":[{"href":"https:\/\/fundamentalis.com\/index.php?rest_route=\/wp\/v2\/posts\/7667","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/fundamentalis.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/fundamentalis.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=7667"}],"version-history":[{"count":5,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=\/wp\/v2\/posts\/7667\/revisions"}],"predecessor-version":[{"id":7672,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=\/wp\/v2\/posts\/7667\/revisions\/7672"}],"wp:attachment":[{"href":"https:\/\/fundamentalis.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=7667"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=7667"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=7667"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}