Sunday, October 27, 2013

Stock Market Valuation?

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Is the market under, over or fairly valued? ITZ takes a look at several charts and market views.

As of today, the Total Market Index - Wilshire 5000 $WLSH is at $18794.5B, which is about 112.8% of the last reported GDP. A ratio of 75% to 90% is fairly valued. Ratio = Total Market Cap / GDP
Current ratio suggests Over Valued.
Warren Buffett’s favored measure is “the market value of all publicly traded securities as a percentage of the country’s business–that is, as a percentage of GNP.”  LINK

Recently, legendary investors like Warren Buffett, Stan Druckenmiller and Carl Icahn have recently come out with cautious statements on the stock market (via Business Insider). Buffett echoed the views of private equity investors that he can't find much value in the market.

Ed Yardeni doesn't expect that the current Q3 earnings season will have much of an impact on earnings expectations for 2014 and 2015, which he remains quite bullish at $122.38 and 134.56 per share, respectively. So forward earnings, currently at a record $119.73, should continue to gain altitude, which is bullish for the flight plan mapped out by Blue Angels for the S&P 500, depending on forward P/Es, of course. The forward P/E of the S&P 500 is at the highest since January 19, 2010.
Earnings & Valuation: Yardeni Research

David Bianco, Deutsche Bank, and Barry Knapp, Barclays, discuss whether underlying market trends are getting better and how best to position your portfolio on a pullback.

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