Wednesday, July 22, 2009
Equity Market Valuation
Having now entered the 2nd quarter earnings season (37 of the S&P 500 companies have reported so far), it seems like the right time to review valuations:
S & P 500 closed at 954.58 yesterday
My fair value opinion: 726.97
The index needs to drop 23.84% to compel me to buy.
At 726.97, the earnings yield would equal the long term average of 4.795%
The earnings yield at current levels is 3.652%.
The earnings yield calculations are based on 2010 numbers: using S & P's forecasts, I arrived at a figure of $34.86.