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Fair Value of S&P 500


valuecfa
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I'm curious what the board's general consensus is for a fair value for the S&P at the moment, factoring in all macro/micro events, point in cycle valuations, shiller valuations, earnings, high corporate profit margins, GDP expectations, austerity measures going forward, China, oil, balance sheet recession, consumer/gov debt ratios, relative valuations to fixed income alternatives, unemployment & inflation/deflation expectations going forward,....etc?

 

Of course, the easy answer is- Who cares i am a stock picker!....A bottoms up investor!  -Putting that thought aside what's your fair value on the S&P? ...a range of numbers perhaps.

 

I'd create a poll of i were savvy enough. I had dinner with Phil Orlando from Federated last week and he was suggesting a 50% rally in 12 months time. This dinner got me pondering what i think is a fair S&P valuation.

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The obvious answer is: The S&P 500 is worth what people are willing to pay for the companies in it.  Most factors are highly favorable for valuation now.  A static evaluation, like the Fed Model, indicates that the S&P 500 should be worth more than treasuries.  But historically, treasury prices are in a bubble, and security prices in general are inflated.

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I tend to browse Easterling's and Shiller's websites as they regularly update their market valuation work.  The other website that pulls together some of the long-term valuation analyses is this one:

 

 

http://advisorperspectives.com/dshort/updates/Market-Valuation-Overview.php

 

 

You probably don't want to spend hours and hours thinking about long-term valuation, but IMO, it's worth spending 2 or 3 hours on one occasion to read Easterling's book and then 15 minutes a few times per year to read the articles that he and Doug Short write.

 

SJ

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