More Joy Under the Buttonwood Tree
The Dow jumped closer to that glowing orb of 11,000 today, and the S&P 500 enjoyed its own surge, surpassing last week's multi-year high.
It has been a big week for economic numbers, and a lot of money is probably playing the December rally game (Charles Biderman says a lot of money has been flowing into US stock funds, at any rate), but Bill Bernstein tells me to follow financial news only enough to learn to ignore it, so I'll do that, at least for the length of this post, and will run down the economic outlook as the numbers call it another day.
The valuation worksheet for today's close shows that even at 1264, the S&P 500, from a price-to-earnings perspective even using conservative earnings metrics, is within a broad "fair value" range.
Calculating multiples at this level of the stock market, the 2005 earnings multiple slide in below the average since 1960, and anticipating a 7% growth in corporate earnings for next year, the multiple nears the post-1935 average. A lower multiple, for fundamental buyers, is a better multiple, though trend traders and the like probably don't care.
So US stocks are not a screaming bargain given a longer historical perspective, but are not terribly highly priced, especially for a period of relatively low inflation and of rather unrewarding bond yields. Dollar-cost-averaging long-termers can probably still smile about their monthly allocations to US stocks.