{"id":8487,"date":"2018-12-07T23:55:37","date_gmt":"2018-12-07T23:55:37","guid":{"rendered":"https:\/\/fundamentalis.com\/?p=8487"},"modified":"2018-12-07T23:55:37","modified_gmt":"2018-12-07T23:55:37","slug":"all-the-sp-500-has-given-back-is-the-3rd-quarter-18-rally","status":"publish","type":"post","link":"https:\/\/fundamentalis.com\/?p=8487","title":{"rendered":"All the SP 500 Has Given Back is the 3rd Quarter &#8217;18 Rally."},"content":{"rendered":"<p>Even though the 10-year Treasury yield fell 15 bp&#8217;s on the week, from 3% to 2.85, the &#8220;forward 4-quarter&#8221; estimate rose $0.04 sequentially ending the week at $171.05, up from $171.01.<\/p>\n<p>What&#8217;s unusual about the sequential increase of $0.04 is that it was the first sequential increase in the SP 500&#8217;s forward 4-quarter estimate since September 14th, 2018.<\/p>\n<p>Here is the data: (Source: IBES by Refinitiv)<\/p>\n<ul>\n<li><em><strong>Fwd 4-qtr est:<\/strong><\/em> $171.05 vs last week&#8217;s $171.01<\/li>\n<li><em><strong>PE ratio:<\/strong> <\/em>15.4x<\/li>\n<li><em><strong>PEG ratio:<\/strong><\/em> 1.84x<\/li>\n<li><em><strong>SP 500 earnings yield:<\/strong><\/em> 6.50% vs last week&#8217;s 6.19%<\/li>\n<li><em><strong>Year-over-year growth of the fwd est:<\/strong><\/em> +8.4% vs last week&#8217;s +8.4%<\/li>\n<\/ul>\n<p>Using the old method of calculating the &#8220;forward 4-quarter estimate growth rate&#8221; (the estimate today vs the estimate 52 weeks prior) the expected forward growth rate is still 20%. Once we lap into 2018 for the 52-week prior estimate, that forward growth rate will drop inline with the calendar 2019 growth rate.<\/p>\n<p>Using the forward estimate vs the four-quarter trailing actual, the 8.4% growth rate is inline with the 2019 bottom-up calendar estimate of $176.25.<\/p>\n<p>Using the $176.26 current Street consensus for the SP 500 estimate for 2019, and assuming a 15x multiple, the SP is trading very close to the 2,643 &#8211; 2,644 SP 500 value. Leon Cooperman said something similar this week on CNBC&#8217;s HalfTime Show, and he was using a $172 estimate for calendar 2019.<\/p>\n<p>So, the question is then, is the current 2019 SP 500 calendar-year estimate of $176.25 too high, too low, or just right ?<\/p>\n<p><em><strong>Summary \/ Conclusion:<\/strong><\/em>\u00a0The SP 500 earnings yield of 6.5% this week is the 2nd highest SP 500 earnings yield since the current correction began in early October, 2018, and that print of 6.52% occurred the week ending October 26, 2018.<\/p>\n<p>Technically, the November low for the SP 500 of 2,632.56 and the October &#8217;18 low of 2,600 roughly are still intact. Those are the key levels that will dictate changes in portfolios, if only slightly.<\/p>\n<p>Here is one last interesting point: as this blog post is being written prior to having dinner with a client tonight in Chicago and as I prepared a spreadsheet showing current account values for the client accounts, the account values at the close of business tonight were almost exactly what they were on June 30, &#8217;18 or the end of the 2nd quarter. Remember it was the third quarter where we saw the sharp ramp in Tech, particularly Apple. Apple ran from roughly $185 at the end of June to $230 by the end of September, or first two days of October.<\/p>\n<p>In terms of the SP 500, all we (meaning investors) have given back since October 1, is the 3rd quarter rally. The SP 500 was up 2.65% YTD as of June 30 &#8217;18.<\/p>\n<p>These are 60% \/ 40%, 65% \/ 35% asset-allocated accounts between traditional stocks and bonds.<\/p>\n<p>The question being asked about the 2019 SP 500 estimate will be addressed as we head into the end of the year.<\/p>\n<p>More to come this weekend.<\/p>\n<p>Thanks for reading&#8230;<\/p>\n<p>&nbsp;<\/p>\n<p>&nbsp;<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Even though the 10-year Treasury yield fell 15 bp&#8217;s on the week, from 3% to 2.85, the &#8220;forward 4-quarter&#8221; estimate&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":[213],"tags":[],"class_list":["post-8487","post","type-post","status-publish","format-standard","hentry","category-2019-sp-500-earnings"],"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\/8487","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=8487"}],"version-history":[{"count":2,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=\/wp\/v2\/posts\/8487\/revisions"}],"predecessor-version":[{"id":8489,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=\/wp\/v2\/posts\/8487\/revisions\/8489"}],"wp:attachment":[{"href":"https:\/\/fundamentalis.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=8487"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=8487"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=8487"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}