"In summary, EPS (S&P 500) is
likely to be near $90 per share in 2016. P/E is likely to be in the range of
20-25 if inflation remains low and stable. Higher inflation or deflation would
drive P/E ratios back to the average of 15 or toward historical secular bear
cycle lows below 10. If P/Es remain above 20, total returns over the next decade
will be 4% to 6%.
If P/Es decline, investors could still see the current level of the stock
market in 2016."
Maybe it will be different this time. But that is a dangerous assumption, as
we watch the twin bubbles of housing and the credit markets implode all over the
developed world. The bubbles may be even worse in England.
I find it hard to get enthusiastic about overall stock market returns at
today's valuations, and given the environment.
Data is from Ed Easterling
of www.crestmontresearch.com