Future earnings growth for the S&P 500 has resumed once again after the flat patch this summer. With the new surge in earnings growth fair value for the S&P 500 has grown as well with our calculation being 1150 on the S&P 500. In reality the recent market surge is discounting the current growth and into 2011 where its likely to accelerate. While Socially Responsible equity investors should be winners at this point and in the intermediate term I’d caution against exuberance.
Investor Sentiment is approaching frothy levels (not quite there yet) caution is advised: Data from AAII shows individual investors, especially those of a speculative bent are very bullish. The Barron’s Big Money Poll shows that institutional managers are extremely bullish as well.
On the positive side of the blotter: Earnings growth is accelerating once again after the soft patch this Summer, so much for the Deflationists. And, who wants to fight the Federal Reserve at this stage with QEII, a losing battle every time.
The bottom line is the recent performance is warranted but don’t get carried away.
Be careful out there
Brad
No positions