Wall Street’s Consensus for 2012

For 2009, the S&P 500 earned $56.87. That jumped to $83.77 last year. Wall Street’s current forecast for 2011 is $96.96.

This means that even after the stock market’s huge rally over the past two years, the forward P/E Ratio is still just 13.75. That’s an earnings yield of 7.27% which is far higher than anything you see in the Treasury market.

For 2012, Wall Street sees the S&P 500 earning $110.10. Let me caution you that forecasts so far ahead in time should be given a reasonable amount of doubt. But even going by those numbers, it means that the S&P 500 is currently going for 12.11 times next year’s earnings. The earnings yield comes to 8.25%.

My point is that the fundamentals greatly favor stocks over bonds. Given the past 11 years’ activity, investors are duly wary of that notion.

Posted by on April 8th, 2011 at 12:43 pm


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