Home Logon FTA Investment Managers Blog Subscribe About Us Contact Us

Search by Ticker, Keyword or CUSIP       
 
 
 
Blog Home
Bob Carey
Chief Market Strategist
Bio
X •  LinkedIn
 

  S&P 500 Earnings Yield indicates that Large-Caps are Undervalued
Posted Under: Broader Stock Market
Supporting Image for Blog Post

 

View from the Observation Deck

  1. Earnings yield is the inverse of the price-to-earnings ratio. The calculation is Earnings/Price. The earnings used in the chart are actual, not estimates.
  2. Over the past 50 years, the earnings yield for the S&P 500 has outpaced the core consumer inflation rate (Consumer Price Index excluding; food and energy prices) by an average of 2.4 percentage points.
  3. When the spread is above 2.4 percentage points, equities are usually considered attractive, according to U.S. News & World Report/Money.
  4. The earnings yield for the S&P 500 closed 2011 at 7.72%, while the core consumer inflation rate finished at 2.20%. The spread was 5.52 percentage points.
  5. Since 1991, the two calendar years with the highest earnings yields (aside from 2011) were 1994 (6.91%) and 2008 (7.24%).
  6. The S&P 500 posted total returns of 34.11% in 1995 and 26.47% in 2009. Keep in mind that past performance is no guarantee of future results.
Posted on Thursday, January 19, 2012 @ 4:19 PM • Post Link Print this post Printer Friendly

These posts were prepared by First Trust Advisors L.P., and reflect the current opinion of the authors. They are based upon sources and data believed to be accurate and reliable. Opinions and forward looking statements expressed are subject to change without notice. This information does not constitute a solicitation or an offer to buy or sell any security.
Search Posts
MARKET ANALYSIS
Market Commentary and Analysis
Market Commentary Video
Monthly Talking Points
Quarterly Newsletter
Market Observations
Subscribe To Receive Email
 


 PREVIOUS POSTS
Putting Capital to Work
Municipal Bond Closed-End Funds Staged Quite a Comeback
Worth the Weight
Opportunity Costs vs. Fear of Loss
A Look at Sectors in 2012
The Role of Stock Dividends
Weakness in the $ has been Good for U.S. Stocks Post Bear Market
Evaluation, Risk and 2012
4th Quarter Review and a Look at 2012
A Dim View of Utilities
Archive
Skip Navigation Links.
Search by Topic
Skip Navigation Links.

 
The information presented is not intended to constitute an investment recommendation for, or advice to, any specific person. By providing this information, First Trust is not undertaking to give advice in any fiduciary capacity within the meaning of ERISA, the Internal Revenue Code or any other regulatory framework. Financial professionals are responsible for evaluating investment risks independently and for exercising independent judgment in determining whether investments are appropriate for their clients.
Follow First Trust:  
First Trust Portfolios L.P.  Member SIPC and FINRA. (Form CRS)   •  First Trust Advisors L.P. (Form CRS)
Home |  Important Legal Information |  Privacy Policy |  California Privacy Policy |  Business Continuity Plan |  FINRA BrokerCheck
Copyright © 2024 All rights reserved.