Scott Black, Barrons, 6/12: The S&P 500 is trading at 1050. Industry analysts expect S&P companies to earn $81.79 this year, which implies a price/earnings multiple of 12.8. The top-down estimate from market strategists is $71.32, for a P/E of 14.7. Let's say the market is selling for 13 to 14 times earnings, compared with a historical multiple of 16 times. Stocks are statistically cheap. The Fed isn't going to raise rates. You're getting great earnings acceleration. Corporate balance sheets are good. The problem is fear. Nobody is paying attention to the good news. [My Italics. But...]
The S&P is down 13.9% from its April 26 peak. The Nasdaq Composite is down 14.3%. The Dow industrials are down 13.2%, and small-cap value stocks are down 18.6%. I expect stocks to end the year higher because P/Es are too low. But I advise staying on the sidelines until volatility drops. It is better to be behind the tsunami than in front of a 20-foot wave
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