Spot the bubble - stock market peak 2013

 

Over the past 2 years, the S&P500 has grown at 5X the speed of earnings growth. Therefore 80% of the reason for the stock market’s climb over the past 2 years may be attributable to P/E expansion alone.  Recently, that reached 25 (on a CAPE basis).

Earnings on the above plot are trailing twelve month as-reported earnings. They’ve gone from $87 in Q3 2011 to (what will probably be) $93.30 this quarter. That’s a 7.25% rise spanning 24 months.  Meanwhile the S&P500 has climbed from 1226 to 1675 (quarterly averages) — a 36.6% rise.  Think this will end well?