CNBC clueless
- Thread starter DWV
- Start date
General Electric. That gem of a stock has really performed well in the last couple years.
lmao.
So true.
I've never read any of his books. There really isn't anything "magical" about the theory. You just have to keep up with what consensus earnings are forecasted for the S&P, and then compare it to what bonds are yielding. Then you have to keep up with each earnings season to determine if the earnings are meeting up to those expectations.
Right now consensus earnings growth for the s&p for 2007 is pretty much in the high 1 digit. You can call the range 7-9%, but most are expecting 9. That yield if it comes to fruition is almost 2 times the current bond yield. Is getting twice the annual guaranteed rate of treasuries worth the risk ? I would think most people would answer yes to that question. Therefore the stockmarket will go up this year as long as bond yields do not rise from their present condition, and most s&P companies are growing their earnings at least 9% year over year(including dividends).
This is why everyone gets concerned with fed speak. They are hoping to get a clue as to the fed's next move. They can already see what the future of earnings are looking like, but they cannot determine what the fed is thinking.
If earnings turn out to be around 7% instead of 9%, and the fed continues to talk tough on inflation, or tries to save the dollar by raising rates then the market will drop, but nothing big until the fed actually raises rates. Each percentage move a bond makes closer to actual yields of the s&p take more people out of the market who are risk averse.