According to the FACTSET June 7, 2109 Earnings Insight report, analysts’ projections for the S/P 500 Index have remained positive. We follow these estimates closely since earnings are one of the main drivers of stock market performance.
For the current 2019 year, the latest analyst consensus estimate is $168.01, up 4.1% from the 2018 figure. For the 2020 year, the estimate is for growth of 10.7% to $186.52. In many cases, the far-out year estimates will change dramatically over time, but the 2020 estimate of $186.52 is only one percent lower than it was in the February 15, 2019 FACTSET report. With the Index at 2,881, the multiple of 2020 expected earnings is 15.4x, which is not excessively high in an environment where the US Treasury ten-year bond is yielding only 2.1%. As long as interest rates stay at this low level, an earnings multiple of 15-16x is not excessive.