[To] Experts: inflation and price-to-earnings ratios suggest a continuation of the U.S. bull market

Ps:2014-04-24 11:51:49

LPL Financial's chief market strategist, Jeffrey Kleintop, believes the Fed's willingness to wait for a further rise in inflation bodes well for U.S. equities.

Bloomberg's chart column today shows how Jeffrey Kleintop to come up with the above conclusions published in the report. According to the relationship between the S & P 500 and CPI since 1950, the highest average price-to-earnings ratio of 17.8 times times the P/S 500 index appears in the CPI increase between 1.5% and 2.5%.

The 1.5%-2.5% of this interval coincided with the CPI increase in March, when CPI rose from 1.1% in February to 1.5% per cent. Mid-range 2% is the same as the Fed's target inflation rate, although the Fed prefers to use an inflation indicator linked to consumer spending.

"The early stages of accelerating inflation are generally helping to spur growth, as consumers are beginning to realize that prices are rising, so they may not postpone shopping," Kleintop wrote. "The performance of this market at different times of inflation may be good news for the stock market," he said.

According to Bloomberg data, the S & P 500 is 17.3 times times earnings in Tuesday.

The report says the P/s 500 price-earnings ratio will fall after inflation exceeds 3.5% per cent, according to historical rules. The CPI increase has never surpassed that level since September 2011. In September 2011, CPI Rose 3.9% from a year earlier, and the S & P 500 index fell 7.2% per cent, driven by rising commodity prices, among other factors.

Kleintop said the rise in inflation would help the energy and raw materials stocks maintain market leadership. The energy and raw materials unit has risen to the top of the 10 major industry classification indices of the S & P 500 index since February 3, when the S & P 500 index hit this year's lows.

Jeffrey Kleintop, a stock-market bull, said in an article in early April that investors would not have to panic as long as they compared today's market with the 2000 bubble, and that there was not much bubble.

Kleintop used the "champagne map" to compare the two-period stock market. 14 years ago, at the end of the bull market in 2000, at the time of the company's fiscal year earnings projections, the P/S 500 index's 62 constituent shares had 16 shares earning more than 30 times times the price-to-price ratio, which accounted for 16 of the total market capitalisation of the P/s 500. "Fast forward to March 28, 2014, we found that only 4 of the 62 stocks in the price-earnings ratio of more than 30 times times, please note that the right Champagne Cup 30 above the dividing line of the bubble number significantly less. ”

According to the company's current fiscal year earnings forecasts, the S & P 500 index is now trading at just over 16 times times, slightly above the long-term average and still accounts for only half of March 2000 's earnings, Kleintop said.

"Although the stock market is likely to have a pullback this year, we don't think the valuations are high enough to trigger a long-term, painful bear market," Kleintop said. On the contrary, we expect U.S. stocks to continue to perform strongly this year. ”

[To] Experts: inflation and price-to-earnings ratios suggest a continuation of the U.S. bull market