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发帖数: 5465 | 1 (Reuters) - Major stock indexes have never been higher - and yet that's
hardly scaring people.
Stocks have soared in 2013, with the Dow .DJI climbing almost 11 percent to
hit a series of new all-time highs while the S&P 500 .SPX has jumped 9.4
percent, falling just short of its all-time closing high after rising for 10
of the past 11 weeks. And yet, analysts for the most part see equities as
fairly cheap.
The rally has slowed, however. In the last eight trading sessions, the S&P
500 has managed a daily gain of more than 0.5 percent just once. Questions
remain about the potential impact of U.S. budget negotiations or the Federal
Reserve's plans in continuing its massive monetary stimulus. The Fed meets
next week.
Taken on its own, analysts see potential for more gains in the U.S. stock
market, based on metrics like earnings prospects and valuation. The forward
12-month price-to-earnings ratio for the S&P 500 is currently 13.5, which is
about 9 percent less than the October 2007 ratio of 14.8 when the S&P last
hit a record.
"This shows that stocks are cheaper than they were at the time of the last
high, and at the same time, alternative assets like bonds are much more
expensive," said Paul Zemsky, head of asset allocation at ING Investment
Management in New York, who helps oversee $170 billion. "We are at record
levels, but you need to look at stocks in the right context, and in that
context, they're not expensive at all."
The S&P 500's earnings yield - a reverse of the P/E ratio - currently stands
at 7.1 percent, compared with 6.41 percent for the BofA Merrill Lynch US
High Yield Index. That's an anomaly in the markets - the earnings yield has
generally been lower than a benchmark junk-bond yield because it measures
the risk of owning the highest-quality stocks versus the expected return on
the lowest-quality bonds.
The current P/E ratio is also below the historic average of 14.8, according
to Thomson Reuters data dating back to 1968. The S&P 500 would need to rise
to about 1,647 to become in line with the historic average - about 5.6
percent above current levels, according to Standard & Poor's.
Interest rates remain near record lows while dividends are growing, another
way that stocks are outshining bonds.
In the most recent quarter, the average dividend yield for S&P 500 companies
was 2.19 percent, more than the 1.89 percent yield in the fourth quarter of
2007, the period of the last market peak, according to Standard & Poor's.
In 2012, 403 S&P 500 components paid a dividend, the highest number since
1998.
In contrast, the 10-year U.S. Treasury note currently yields 2 percent, so
the dividend yield on the S&P 500 would pay more than the bond, without even
factoring in potential price growth.
WHERE SHOULD STOCKS BE?
The S&P 500 is also trading well below its intrinsic value, another metric
of earnings-based valuation that estimates where a security should trade,
based on its expected growth trajectory over the next decade or more.
The index is seen as having a price to intrinsic value ratio of 0.85,
according to Thomson Reuters StarMine, which means it would have to rise 15
percent to be in line with its earnings growth trajectory. More than two-
thirds of companies are below their intrinsic value, including some of the
biggest.
Apple Inc (AAPL.O), which has tumbled 16.6 percent this year, is 28.2
percent under its intrinsic value, based on its Friday closing price, while
Exxon Mobil Corp (XOM.N) is 23.3 percent under and Bank of America Corp (BAC
.N) is 53.3 percent under its intrinsic value.
Other companies show signs of being overbought. Google Inc (GOOG.O), which
has jumped about 15 percent so far this year, is about 16 percent higher
than intrinsic valuation. Amazon.com Inc (AMZN.O) is 85 percent above its
intrinsic valuation of $39.17.
"You need to be selective. While on the whole, we're in a constructive
market supported by dividends and earnings, some companies have probably
seen peak levels already," said John Carey, portfolio manager at Pioneer
Investment Management in Boston, which has about $200 billion in assets.
The market's gains this year have come on accommodative monetary policy from
the Federal Reserve and strong corporate results, two factors that
investors don't see going away any time soon.
The Federal Reserve's interest-rate-setting committee meets next week.
Despite calls from some of the board's more hawkish members to reduce asset
purchases, the Fed is expected to continue on its current path.
Recent data - ranging from retail sales and manufacturing to employment -
has shown the economy is picking up some momentum. But the high U.S.
unemployment rate of 7.7 percent gives the policy committee room to keep
buying $85 billion a month in bonds to keep interest rates low.
And while the stock market's two previous peaks were followed by recessions
stemming from the bursting of the dot-com bubble in 2000 and the 2008 credit
crisis, there is no apparent equivalent today.
"I don't see anything that looks like a speculative bubble, and there's no
sign of the euphoria that marks the end of a bull market," said Ken Fisher,
who oversees $46 billion at Fisher Investments in Woodside, California.
(Wall St Week Ahead runs every Friday. Questions or comments on this column
can be emailed to: ryan.vlastelica(at)thomsonreuters.com)
(Editing by David Gaffen and Jan Paschal) |
