Jimmy's Trading Room: Is S&P 500 Over Price ?

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Sunday, June 14, 2020

Is S&P 500 Over Price ?

Is S&P 500 Over Price ? Let do a Simple Analysis:

Following is a history of earning from NYU published the chart below on Jan 5, 2020. Please take note Y2019 actual earning is $139.4 and not $162.35 the forecast predicted

What happen in 2008 subprime crisis ? it drop from $82.54 to $42.51...33.9% !

This year most likely it will drop more than Y2008 33.9%, but let assume we just use 33.9% drop from Y2019 earning of $139.4 to estimate this year earning.

The projected this year earning will be $139.4 - ($139.47*33.9%) = $92.3

Refer to the S&P 500 PE Ratio - 90 Year Historical Chart,

Let use 14 PE to estimate the S&P 500 fair value.. 14*92.3 = 1292.

Today S&P 500 Price 3041

You can estimate S&P 500 next year earning and PE, and decide yourself at what price you think is value investing..

S&P 500 PE Ratio - 90 Year Historical Chart