Markets – Macro – Technicals

$SPX: Pay More for Less

Earnings growth = record prices or so the general financial headlines seem to convey. And, without context, all this is true. Earnings have bounced back a bit from last year’s energy driven earning malaise and we even have seen growth in revenues.

Yet what seems entirely missing is context: Investors are paying a lot more for a lot less. While select companies are doing well, S&P GAAP earnings, as a whole, remain far below the 2014 peak:

The main reason: Sizable multiple expansion. In 2014/2015 GAAP P/E was sitting at around 20. Now it’s sitting above 25:

That’s a lot of optimism. And in short: Whoever is buying is paying more for less.

Some people know what to do in an environment such as this:

And so are others:

What are you doing?


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1 Response »

  1. Goes with Real Estate, too….

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