Irrational Exuberance Is Back… And Even The Fed Is Worried

Jon Alternative Media, Blogosphere, Economy, Fiscal Policies, Real Estate

Authored by John Authers, originally posted at The FT,
Markets are extravagantly confident that brokers are too bearish, and that their profit forecasts for US companies are too low. The multiple of 18 times next year’s projected earnings at which the S&P 500 currently trades, according to Bloomberg data, allows little other interpretation. It is at its highest since 2002, outstripping any level it reached during the credit bubble, or when the Federal Reserve was pumping up asset prices with QE bond purchases.
There are other signs that optimism on earnings is taking hold. For a while, the S&P has been dominated byhigh dividend-yielding stocks. This is a sensible strategy when you do not have faith in corporate profitability or growth. In the past few weeks, however, the S&P 500 Dividend Aristocrats index has started to lag behind the market. Classic income-producing sectors, such as utilities and real estate investment trusts, have also ceded leadership.

This post was published at Zero Hedge on Aug 20, 2016.