Sunday, February 19, 2017

Markets are Closed Monday for Presidents Day ... Earnings and PEs … CASS FREIGHT INDEX

Enjoy Presidents Day.
Two great books on George Washington:
(1) Washington’s Crossing , David H. Fischer. It covers the military campaigns early in the revolution.
(2) Washington, A Life, by Ron Chernow. It covers his entire life.
Both were Pulitzer Prize winners.
-For Q4 2016, the blended earnings growth rate for the S&P 500 is 4.6%. The fourth quarter will mark the first time the index has seen year-over-year growth in earnings for two consecutive quarters since Q4 2014 and Q1 2015. [AS noted before, this is the real reason for the “Trump Rally”.
-The current forward 12-month P/E ratio of 17.6 is now above the four most recent historical averages: five-year (15.2), 10-year (14.4), 15-year (15.2), and 20-year (17.2). In fact, this week marked the first time the forward 12-month P/E has been equal to (or above) 17.6 since June 23, 2004. 
FACTSET excerpts and chart from FACTSET at…
The chart doesn’t look scary, but John Hussman, PhD, has pointed out on multiple occasions that the median PE is now higher than it was during the bubble. Valuation may be stretched, but it can stretch higher.  Valuation alone is a poor way to time the market.
CASS FREIGHT INDEX (CASS Information Systems)
“Both the Shipments and the Expenditures Indexes have now turned positive. [Year-over-year +3.2% and +4.3% respectively] Throughout the U.S. economy, there is a growing number of data points that suggest that the worst is over and the economy is getting better. Some data points are simply less bad, but an increasing number of them are better, and even a few are becoming outright strong.” CASS Freight Index report.  Available at…