U.S. markets have seen a great start to 2019, thanks to a dovish Fed and U.S.-China trade optimism. The has recovered sharply this year from the Christmas lull and has touched 2,800 for the first time in nearly four months. The index also recorded its ninth weekly gain in the last 10 weeks. And the Jones hit its 26,000 mark in late February for the first time since Nov 9.
The S&P 500 returned 3.0% in February on top of 7.9% in January. This helps the key equity gauge to log the fifth largest gain to start a year in the history of the S&P 500 and the best start since 1987.
Are Stocks Overvalued?
After the astounding gains, thoughts of a correction in the market or overvaluation concerns are justified. This is especially true given that stocks have become 17% pricier in the last two months while profits are fading.
Analysts’ earnings estimates for Q1 and Q2 of 2019 are declining. The consensus estimate for earnings is now likely to decline 2.7% for Q1, and rise just 0.7% for the June quarter, “representing a downward swing of 4.2 points in the outlook since the start of the year,” per an article published on Fortune.
Analysts are deducing operating EPS, which is normally around 15% lower than the GAAP. The blend of declining earnings projections and the S&P’s two-month jump has boosted the forward P/E from 15.1x at the start of the year to 17.7x right now, per some analysts.
Meanwhile, global growth worries remain rife. Most of the developed economies, especially in Europe and some emerging economies, have been suffering from a slowdown. Though there were signs of improvement in 2019, U.S.-China trade tensions are not resolved yet. Even if the duo manages to strike a deal, the hope