As part of our continuing scrutiny of the S/P 500 Index earnings forecasts, our latest update shows slow earnings growth in 2019 and an increased rate for 2020. Specifically, the FACTSET estimate for 2019 is $165.36, up 2.4% from the 2018 level. For next year, the forecast expects earnings of $182.72, up some 10.4% from this year. Importantly, the 2020 forecast is down about 4% from the forecast issued on February 15, 2019.
If we use 2,900 for the Index, the price-earnings ratio on 2020 forecast earnings is 15.8x, a historically high multiple. With interest rates so low (Treasury 10-year is 1.5%), however, the earnings multiple is not excessive.