Do you believe in reversion to the mean? I do. Home prices and corporate earnings always revert to their long term averages. That is how you get long term averages. The Wall Street shills and shysters are predicting S&P 500 earnings to soar ever higher as the world heads into recession. I’m just a tad bit skeptical, but if you believe them, then buy stocks. The choice is yours. You can think or believe.
Today’s chart provides some further perspective into the past and future trends of 12-month, as-reported, inflation-adjusted S&P 500 earnings. Today’s chart illustrates how earnings declined over 92% from its Q3 2007 pre-financial crisis peak and then, beginning in Q1 2009, quickly surged back to near record levels. This begs the question; will corporate earnings make new record highs? As today’s chart illustrates, based on the latest S&P 500 earnings estimates (see red line), earnings are expected to make new, inflation-adjusted record highs during the first half of this year. Considering the current global economic environment, this is indeed quite an achievement.
Pirate Jo says:
It kinda looks like a heart attack.
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20th January 2012 at 9:58 am