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How High Can US Stocks Go this Year?
January 08, 2014 at 19:00 PM EST
2013 was a great year for stocks, but less so for earnings. As a result, equity valuations rose sharply. Given higher multiples and the magnitude of last year’s rally, many investors are wondering whether the gains can continue, and just how high stocks can go this year. I foresee U.S. equities posting more muted gains in 2014. Why? The interaction of two factors that defined the market last year – significant multiple expansion and higher interest rates – represents a headwind for stocks this year. Most of last year’s stellar advance was powered by higher multiples. In other words, investors were willing to pay increasingly more for a $1 of earnings. Over the course of 2013 the trailing price-to-earnings (P/E) ratio on the S&P 500 rose from 14.2 to 17.50, a 22% increase. Based on P/E measurements, stocks are commanding the highest valuation since early 2010, when multiples were still [...] Click here to read the original article on ETFdb.com. Related Posts: No Related Posts
2013 was a great year for stocks, but less so for earnings. As a result, equity valuations rose sharply. Given higher multiples and the magnitude of last year’s rally, many investors are wondering whether the gains can continue, and just how high stocks can go this year. I foresee U.S. equities posting more muted gains in 2014. Why? The interaction of two factors that defined the market last year – significant multiple expansion and higher interest rates – represents a headwind for stocks this year. Most of last year’s stellar advance was powered by higher multiples. In other words, investors were willing to pay increasingly more for a $1 of earnings. Over the course of 2013 the trailing price-to-earnings (P/E) ratio on the S&P 500 rose from 14.2 to 17.50, a 22% increase. Based on P/E measurements, stocks are commanding the highest valuation since early 2010, when multiples were still [...]
