Playing on profits cycle?
In the article it is shown that year-to-year change of the S&P 500 does not depend on profits cycle. On the other hand, year-to-year change of earnings multiple P/E tends to anticorrelate with profits cycle. It shows sluggishness of market response in relation to profits cycle. It is shown that there is one important condition for development of new long-term bull trend. It is presence of phase of earnings accumulation. Such accumulation is possible only during periods of significant outstripping of earnings growth over the market growth. Now there is no phase of earnings accumulation, because market returned to 8% long-term growth rate, which outstrips the 5.5% long-term earnings growth rate. Such conditions can support only sideways market at best.
|Date of creation:||11 Nov 2003|
|Note:||Type of Document - pdf; prepared on WinNT; to print on HPLaserJet; pages: 9; figures: 10 color figures . PDF, 10 color figures included|
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