S&P 500 PE Ratio Forecast: 2010 - 2011

Experts are split on what's behind this huge 4-year long bull market. Some believe it has been driven by improving fundamentals.  Others believe it has been driven by the Federal Reserve's easy monetary policy.

Experts are split on what's behind this huge 4-year long bull market. Some believe it has been driven by improving fundamentals.  Others believe it has been driven by the Federal Reserve's easy monetary policy.

Chuck Carnevale submits:On September 5, 2010 we published an article on Seeking Alpha that suggested that the S&P 500 would reach 1245 by year end. This forecast was based on the S&P 500 trading at its 80 year historical normal PE ratio of 15 and a consensus earnings forecast for calendar year 2010 of $82.98. Below is the earnings and price correlated F.A.S.T.

Here is a new update of a popular market valuation method using the most recent Standard & Poor's "as reported" earnings and earnings estimates and the index monthly averages of daily closes for the past month, which is 1,550.83. The ratios in parentheses use the monthly close of 1,569.19. For the earnings, see the table below created from Standard & Poor's latest earnings spreadsheet. ● TTM P/E ratio = 17.5 (17.7) ● P/E10 ratio = 22.5 (22.7)

Average daily trading volume in the S&P 500 index has fallen every year since the crisis, and in 2013, it's now at levels not seen in 15 years. You have to go all the way back to 1998 to observe lower trading volumes in the index:

Sean Hannon submits: After reviewing my 2010 predictions, I now look ahead to 2011. For this article I will outline five predictions for the year ahead as well as four potential surprises that could debunk my theses. Doing so will allow the reader to consider both angles of the argument - a practice we should all adhere to as investors.

Steve Reitmeister submits:After a stellar +26% gain for the S&P 500 in 2009 the market is set to post a solid 12%+ showing in 2010. Even with the strong profits already in hand, most signs point to more upside in 2011. Here are the top fundamental reasons for the rally to continue for a third straight year.

If last week’s market action is any indication, the proverbial “sell in May and stay away” axiom may be ahead of schedule this year… Equities had to deal with a disappointing jobs report, an underwhelming bond auction in Spain, a handful of disappointing key earnings reports, and less-than-encouraging consumer confidence data.