I thought I'd close the selling stampede series out with a few thoughts.
By definition the recent selling stampede is over. However, I still look for turbulance within the markets but trending upward as we move towards spring and on towards summer.
By my calendar the selling stampede lasted thirty three days. Some say it will take two to three times as long for the Index to recover as the stampede lasted coming off a bottom of 1829. For the Index to reach a new 52 week high it will need to gain about 16.8% (307 points). And, for it to get back to where it started the year it will need to gain 11.8% (215 points) from its bottom close of 1829. Year-to-date the S&P 500 Index is down -5.7% ... off it's 52 week high by 9.7% ... and, is no longer in correction territory since it is above 1922 with a close of 1927 yesterday.
On forward estimates I compute the P/E Ratio to be around 15.8 and on reported earnings (TTM P/E Ratio) at about 19.4. Currently, full value of the Index is computed to be around 1985 based upon my earnings model. With the Index currently at a reading of 1927 it will not be long (another three percent of gains) before it will reach full value. So, how does it reach a new 52 week high? Either reported earnings will have to grow to somewhere around $112.50 (by fall) with a TTM P/E Ratio of 19 or investors will have to be willing to pay more for a dollars worth of earnings should these earnings estimates be short of projections. During this bull market run I have seen TTM P/E Ratio numbers north of 21.
I am thinking a new 52 week high for the 500 Index will be reached before yearend should earnings estimates materialize as they are currently projected to be at least $112.50; and, investors are willing to pay at least $19.00 for a dollars worth of anticipated reported earnings. Naturally, the investment climate is most important for this new high to be achieved and it would be most helpful for the FOMC to govern softly on anticipated rate increases.
