- Compustat, I/B/E/S, FirstCall, Goldman Sachs
Even if the week didn’t start with the bang it ended with last week, the “this-market-is-looking-expensive” chatter will not be put down against the backdrop of a dovish Fed and an S&P 500 SPX -0.01% that has 22 record closes under its belt for the year so far. (The current bull market still has a below-average number of highs, read on.)
Goldman Sachs, for one, doesn’t see much standing in the way of more stock-market gains. In a note to clients on Friday, chief U.S. equity strategist David Kostin and his team said they expect the S&P 500 to grind up over the next two-plus years as earnings growth continues, and rolling forward their 12-month price target to 2,000 — 2,100 in 2015 and 2,200 in 2016 are further-out targets. (Note that of the most bearish Wall Street analysts, Deutsche Bank’s David Bianco also thinks stocks are looking pricey, but doesn’t see the S&P 500 reaching 2000 until end 2015.)
From Goldman comes the question and answer of how to find a happy meeting place at the intersection of value and growth.
- Goldman Sachs
The forward p/e ratio for the S&P 500 is at 16.5, an 18% premium to the average seen during similar real interest-rate environments of 1% to 2%, notes Kostin. The average seen since 1976 is 13.5 times along with real interest rates of between 1% and 2%. And margins have also stagnated at a record high level since 2011….”Twitter