Back on August 28th we posted Is the S&P500 Index Fairly Priced? based upon 5 basic long-term market trends (1932 to 2017). Then on September 15th we posted Follow-up: Is the S&P500 Index Fairly Priced? based upon 5 basic post-recession market trends (2010 to 2017). In those posts we limited our analysis to only the latest reported earnings (03/31/2017) and dividends (06/30/2017) for evaluating current market valuations. In this post we are broadening the analysis to include 3 to 4 sources for earnings data and 2 sources for dividend data along with year-ahead projections for the S&P 500 Index. Specifically, we will compare expected market valuations based upon both short-term & long-term trends for the following:
Log (S&P 500 Index Price) vs. Time - Chart 1 in both posts
S&P 500 Index Price vs. Earnings - Chart 2 in both posts
S&P 500 Index Price vs. Dividends - Chart 3 in both posts
Log (S&P 500 Index Price) vs. Log (Earnings) - Chart 4 in both posts
Log (S&P 500 Index Price) vs. Log (Dividends) - Chart 5 in both posts
First, let's summarize the 5 short-term formulas with their respective coefficients of determination:
(Expected Value)S&P500 = 367.3 x (1.115497)YR-2000 , R2 = 0.9468 (Chart 1)
(Expected Value)S&P500 = 27.053 x (Earnings) - 704.96, R2=0.5356 (Chart 2)
(Expected Value)S&P500 = 46.464 x (Dividends) + 106.14, R2 = 0.9589 (Chart 3)
(Expected Value)S&P500 = 3.4757 x (Dividends)1.376 , R2=0.5633 (Chart 4)
(Expected Value)S&P500 = 63.973 x (Dividends)0.928 , R2 = 0.9591 (Chart 5)
Second, let's summarize the 5 long-term formulas with their respective coefficients of determination:
(Expected Value)S&P500 = 0.7239 x (1.071115)YR-1900 , R2 = 0.9726 (Chart 1)
(Expected Value)S&P500 = 20.078 x (Earnings) - 6.12, R2 = 0.9080 (Chart 2)
(Expected Value)S&P500 = 52.279 x (Dividends) - 56.99, R2 = 0.9316 (Chart 3)
(Expected Value)S&P500 = 12.601 x (Earnings)1.0958 , R2 = 0.9451 (Chart 4)
(Expected Value)S&P500 = 20.46 x (Dividends)1.2596 , R2 = 0.9698 (Chart 5)
Third, let's summarize the input data for the 4 different periods starting with the last earnings report period:
03/31/17: EPS=105.17, DIV=46.57, YR=2017.25
09/30/17: EPS=123.81, DIV=49.75, YR=2017.75
03/31/18: EPS=133.54, DIV=50.59, YR=2018.25
09/30/18: EPS=137.99, DIV=51.42, YR=2018.75
Fourth, let's compute the expected values for the S&P500 Index for each period using the 10 formulas and weight the results by the respective coefficients of determination for each formula:
03/31/17: Expected Value = 2274.60
09/30/17: Expected Value = 2521.79
03/31/18: Expected Value = 2645.11
09/30/18: Expected Value = 2726.99
For original post: http://ift.tt/2xWkB1w
For short-term charts: http://ift.tt/2x4Omdm
For long-term charts: http://ift.tt/2wNDO56
Submitted September 22, 2017 at 01:23AM by DTRS_Investing http://ift.tt/2jO8ZaL