S&P 500 Forward Earnings - $110
Even with tall the downbeat economic forecasts, S&P 500 earnings expectations for the next 12 months remains around $110. At a average PE multiple of 15, the S&P 500 would be trading at 1,650. The low interest rates and inflation would normally suggest a higher PE in the 16-17 range. That might sound crazy, but that is the reality if normality returns to the stock market. The current bond markets and interest rates remind me of the real estate market around the end of 2006. Everybody thought housing prices in California and Las Vegas were extremely high yet most people kept piling on. The logic didn't make sense, but the end of momentum can be difficult to predict. Fast forward 6 years and now the bond market is doing the exact same thing. Investors are jumping into bonds even though conventional wisdom suggests the opposite to be the best move. Stocks are very cheap on historical standards and earnings remain very strong yet few people want them. Investors fear anoth...