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Close To Fair Value? - Today's Editors' Picks

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By SA Editors' Picks :

Hello! I'm your curator, Michael Hopkins.

Here are today's Editors' Picks:

Chart of the day : S&P average earnings premium since 1881 .

Some context: Tracking the average earnings premium on the S&P 500 for the past 150 years shows a huge secular shift that started in 1950 and lasted until 2000.

Comment of the day , from reader tdanzig .

My simplistic viewpoint is that stocks have 'historically' traded around a 15 P/E and the 10-year treasury has hovered around 5%. A 15 P/E works out to a 6.67% earnings yield which makes a long-term historic equity premium right around 1.5%A 10-year treasury field of 3% plus a 1.5% equity risk premium equals roughly 4.5% earnings yield or about a 22 P/E. Seems to me by these very rough calculations we're not too far from fair value.

Image of the day : The Colorado River, near Fruita, Colorado.

Quote of the day :

Giving frees us from the familiar territory of our own needs by opening our mind to the unexplained worlds occupied by the needs of others. - Barbara Bush

Thanks for reading. Please share your "Editor's Pick" with fellow investors by posting it in the comments.

Have a great day!

Michael

See also Capitalizing On Big Data's First Stumble on seekingalpha.com

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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