I read an article explaining the similarities of the recent “four-fecta”: the Dow Jones, the Nasdaq, the S&P 500 and the Russell 2000 all hitting record new highs on the same day! Yes, in that respect, it is like the last time this happened in 1999. But the similarities end there, in my opinion.
The difference between now and the 1999 bull market is that we are not in a tech bubble. Every major index was overpriced when compared to earnings. Now we’re at the beginning of slight overpricing. But when projected out on future earnings, the broad-based S&P 500 is fairly-priced for 2017 and under-priced for 2018.
According to Yardeni.com, earnings for the index will $132.61 in 2017 and then $148.11 the next year. This puts the P/E ratio at 16.52 and 14.79, for each respective year. The 2018 number is below the historic average. That’s why it’s under-valued for that year’s estimate.
We’re actually at the beginning of what I think is a long-term bull market that began in 2013. Here’s an article I wrote then expressing that opinion: reprint-superbullmarket-senior-beacon-2013-sept-doc