Investors pricing stocks for earnings growth
Based on this chart of price-to-earnings ratio among S&P 500 stocks, which has surged since the early March bottom, stock buyers are anticipating that corporate earnings are going to grow. The latest spike shows a 50 percent rise in the index while earnings have declined.
Bespoke Investment Group, which produced the chart, notes: “Obviously if the current bull is going to have any sustainability at all, earnings will have to start growing again. But for now, as evidenced by the skyrocketing P/E ratio, investors are paying up on the hopes of future earnings growth.”
That reflects a surprising level of optimism. (via Felix Salmon)
Don Mecoy
Business News
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