Next years S&P earnings around 200, with a 13x multiple at a bear market panic sell off bottom would put us at 2600. 15x at 3000
Pretty realistic if the recession gets bad.
Current estimates for the S&P predict earnings growth even though there’s a very clear recession on the horizon, likely deep.
Anyway, lots of cheap stocks out there now if you avoid the index. Still too many absurdly overvalued constituents like Chipotle and Costco (40-50x trailing PE, just why)
My biggest concern is, while I agree with you that S&P 2023 EPS TTM could end up being $200, because we have not yet seen this reflected in estimates (Yardeni earnings forecasts shows $235 as an estimate), we have more room to fall before the expectation (let alone the reality) of that is priced in.
$235 Yarendi expectation -> $200 your expectation is a 15% difference. That means analysts (and consequentially the market pricing in those analysts expectations) are "incorrectly" estimating earnings 15% higher than they might be in your opinion.
Analysts predicted ~10% earnings growth in 2008 and it turned out to be -70%
Analysts by and large just extrapolate the trend. If there’s a severe recession, actual earnings could be 190 or even less.
That being said, buying around 3500 or below seems a decent value long term. But I don’t think this is a market where you should wait, instead pick individual companies that are already too cheap and hold them.
I bought a bunch of REITs with 6-8x ffo multiples, low debt, and double digit growth rates. Why bother with the 20x+ PE companies?
There are also many small cap growth companies at 1-2x sales and 30%+ growth rates. Why buy one at 10x sales?
IG bonds yielding 8% close to risk free?
You’d think this would all be obvious, yet major imbalances in valuations exist and is there for the taking.
Pretty realistic if the recession gets bad.
Current estimates for the S&P predict earnings growth even though there’s a very clear recession on the horizon, likely deep.
Anyway, lots of cheap stocks out there now if you avoid the index. Still too many absurdly overvalued constituents like Chipotle and Costco (40-50x trailing PE, just why)