The Bulls Charge Forward Pushing the S&P 500 To All Time Highs
It was an eventful week on Wall Street with new records set as the S&P 500 topped its previous September highs. The major index closed at 2945 for the first time in history this last Tuesday. Among the reasons for the optimism is a better than expected earnings season so far.
So far 76% of the S&P 500 companies have reported their Q1 2019 earnings; from those companies that have reported, 76.6% have reported better than expected earnings per share, while 56% have reported positive revenue figures than the consensus. At the start of the year, FactSet had shown an estimate of -4.5% growth on earnings for Q1, but now with the better than expected numbers, it’s looking like the number will be -2.3%[i] Although we don’t like to see negative growth, the fact that things are turning out better than originally expected acts as a tailwind to stock prices.
The question then becomes, are we due for a major pull back? We turn to valuations to answer that question. The blended forward 12-month price-to-earnings for the S&P 500 sits at 16.8X, while the 5-year average is 16.59X.
That indicates that even though we are sitting at all-time highs, the S&P 500 is not overvalued and therefore we would view any short-term pull backs as a buying opportunity.
This week, Robert Luna, Surevest CEO & Chief Investment Strategist shared his insights with Nicole Petalides on various Surevest holdings. You can watch his appearance on TD Network by clicking here.
[i] Source: FactSet Earnings Insight
