Ignore Washington, Focus On Market Fundamentals
Brian Gilmartin | Dec 23, 2012 12:26AM ET
As the 4th quarter, 2012 winds down and with all eyes focused on Washington, it has been a better year for stock and bond returns than many expected. The S&P 500 is up roughly 15% – 16% year-to-date, and the Lehman Aggregate will end the year with an increase of 4% – 5% (approximately).
In terms of S&P 500 (and per ThomsonReuters), the “forward 4-quarter” estimate for S&P 500 earnings is now $108.91, down slightly from last week’s $109.09, and towards the lower end of the 3-month range of $107.89 from Sept 28th, and $112 from October 5th. This pattern is typical of how earnings estimates “evolve” during a quarter. The forward estimate tends to get revised downward through the quarter, and then we will see a nice “pop” in that forward estimate as we roll into the first week of January, as the old quarter rolls off and we add the next forward quarter to the estimate.
With 3rd quarter, 2012 financial results all but reported (497 of 500 companies have reported their 3rd quarter, 2012 results already), the calendar 2012 earnings estimate for the S&P 500 is $101.38 as reported by ThomsonReuters (7 estimates), and I would expect that to drift a little higher as the 3rd quarter results are finalized, and the 4th quarter starts getting reported in early January.
Thus, the S&P 500 is trading at 13(x) those forward earnings expectations.
Last week, Here was our earnings preview , and we couldnt have been more wrong. Nike up sharply on Friday in a tough tape.
Have a wonderful holiday and New Year.
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