The Market’s Recent Rise

The Lehmann Letter (SM)

The stock market rose after the November election, buoyed by the prospects of a pro-business regime.

The stock market fell this week, disappointed by events in Washington.

Examine the table below. It features the stock market (S&P 500), earnings per share at an annual rate (EPS) and the price/earnings ratio (P/E).

The S&P and EPS have fluctuated in a range for two years. The P/E has reached 25:1, a substantial ratio. It seems that EPS must break free and rise as a precondition for the S&P’s renewed improvement.

Annually                  S&P              EPS              P/E

Jan. 1, 2010            1169.43        60.93            19.19

Jan. 1, 2011            1325.83        81.31            16.31

Jan. 1, 2012            1408.47        88.54            15.91

Jan. 1, 2013            1569.19        87.70            17.89

Jan. 1, 2014            1872.34        100.85          18.57

Jan. 1, 2015            2067.89        99.25            20.84

Quarterly

June 30, 2015         2063.11        94.91            21.74

Sept. 30, 2015        1920.03        90.66            21.18

Dec. 31, 2015         2043.94        86.53            23.62

March 31, 2016       2059.74        86.44            23.83

June 30, 2016         2098.86        86.92            24.15

Sept. 30, 2016        2168.27        89.09            24.34

Dec. 31, 2016         2238.83        94.55            23.68

Recent

May 4, 2017            2389.52        94.55            25.27

Questions or comments? Contact Mike Lehmann at lehmannm@usfca.edu.

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© 2017 Michael B. Lehmann