Stocks are cheaper than they were in January. S&P 500 forward earnings has risen twice as fast as the S&P 500 stock price index so far this year. So the forward P/E has declined as the index rose to record highs. The impetus was FEMO (fabulous earnings momentum) as opposed to FOMO (fear of missing out). Investors are getting more earnings for their money than they were eight months ago.
Here's more:
I. Performance. The S&P 500's forward earnings is up 24.9% ytd versus a 12.1% gain in the index, which has pushed the forward P/E down 9.9% (chart). Forward earnings has risen almost uninterrupted this year, while the price index has stalled and pulled back repeatedly.
One would expect earnings momentum this strong to be showing up in the price action of the S&P 500’s biggest earnings producers. It isn't. The Magnificent-7 is up 2.0% ytd versus 16.3% for the S&P 500 ex-Mag-7 and 12.1% for the index (chart).
