There’s a lot to be glum about in the stock market – and the world, really – at the moment, but in ourcall of the dayMichael Kramer, founder of Mott Capital Management, is confident there’ssome serious upside potentialin the coming years.
It all starts with valuations.
Kramer points out that the earnings multiple of the S&P 500 index SPX,– 0. 39% on a trailing 12 – month basis sits around 19. 7, the lowest level since June 2016 – a time when “the world literally felt as if it was on the verge of a meltdown”. (That multiple is a key method of measuring the value of a stock relative to earnings.)
But, in the reality that perhaps matters most to markets, we were in the midst of an earnings recession that would soon come to an end.
The bull market had life and, three years later, it still does, he says.
Read :How big will this year-end rally turn out to be?
For some context, Kramer used earnings data going back to 1988 and projections through to 2020, then overlaid that with a chart of the S&P for what he says is a self-explanatory reflection of where we stand.
And, more importantly, where we’re headed.
Kramer explained that the numbers show attractive equity valuations and, if corporate earnings continue to increase as expected, the market “has a great distance to rise” in the coming years.
Stocks are rising this morning, though not by “a great distance” yet.
The market
Futures on the Dow YM 00, 0. 12%, S&P ES 00, 0. 34% and Nasdaq (NQ) , 0. 38% are all in the green ahead of the opening bell. The pound GBPUSD, 0. 2158% isfairly volatileas investors wait for more Brexit updates after Prime Minister Boris Johnson’s deal vote was a non-starter on Saturday. Europe SXXP, 0. (%) stocks are up.
The chart
Yes, it’s a bit hairy out there.
The buzz
We’ve got a big week of earnings coming up, with bellwethers like Microsoft (MSFT,– 1. %, Amazon AMZN,– 1. 68%, Procter & Gamble (PG, ( 0. 72% and Boeing BA,– 6. 79% among notables on the docket.
Voters won’t have to wait much longer to hear how Democratic presidential candidate Elizabeth Warrenplans to pay for the “Medicare for All” future she envisions. The Massachusetts senator, who says she’ll give the details of her plan soon, came under heavy fire from her opponents during last week’s debate for refusing to say whether her plan would raise taxes on the middle class.
The strike at General Motors ********************************************** (GM,) – 0. 06% is spilling over into a second month, and the impact isintensifying across the Midwestin the UShe United Auto Workers union banged out a tentative labor deal with GM last week, but union leaders opted to continue picketing until workers approve the agreement.
The quote
“Market stability should not be the subject of a tweet here or a tweet there. It requires consideration, thinking, quiet and measured and rational decisions. ”- Christine Lagarde, soon-to-be president of the European Central Bank,in an interview that aired on Sunday nighton CBS’s “ 60 Minutes ”.
The economy
New and existing home sales figures for September are probably the economic highlight of the week, but we won’t get a look at those until Thursday and Tuesday, respectively. There’s nothing of note on the docket today. University of Michigan rounds out the week on Friday morning with the consumer sentiment index.
Read:Latest data does nothing for investors ‘animal spirits’
The tweet
Random reads
Influencers can buy 1, 00 0 fake followers on Facebook FB,– 2. (%) for $ 34. Advertisers pay billions for them to pitch products to real people.
There’sa bear market in religion.
This sure looks like Republican senator Mitt Romney’s secret Twitter TWTR,– 1. 57 % account.
A man stabbed his brother to death;now he earns six figuresin Silicon Valley.
The grim reality of whatclimate change could doto three major US cities.
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