“At its record high, the forward earnings of the S&P 500 stood at $103.62, and the forward price-earnings ratio was 15.1,” according to Ed Yardeni, president and chief investment strategist at Yardeni Research. According to Yardeni, the market is about 15% cheaper now than it was at its’ record high, as earnings were 7% higher then.
The case for investing in the S&P 500 now is looking stronger. The fact that central banks around the globe have kept borrowing rates low should encourage more investors to get back into the market. [ETF Chart of the Day: Dividends]
There are still lots of uncertainties that can support a bearish case. The anticipation of lower corporate earnings and the economic slowdown going on around the world still has many investors on the sidelines.
According to Thomson Reuters data, the S&P’s second quarter earnings grew 8.4% thanks to the financial sector. Trang Ho for Investor’s Business Daily reports that if financials are excluded, second-quarter earnings growth is merely 1.4% and analysts expect a 0.3% decline in third quarter.
