What’s Going On?

Since the Fed decision to increase interest rates on May 10th, the market has taken a completely different character.  The Fed did not signal that a pause in the rate hike regimen was imminent, leaving the door open for policy flexibility.  Some market participants interpreted this to mean that the Fed was going to kill […]

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Using Forward Earnings

We have noted the poor fit — both descriptive and prescriptive — of using backward-looking earnings as a valuation measure.  Let’s consider a look at forward earnings.  The chart here shows Thomson First Call forward earnings versus the yield on the ten-year Treasury note.  It is a simple method, testing the idea that investors look […]

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After the Fed

What will happen when the Fed is finished with the tightening cycle?  To get a dash of insight, take a look at the Fed Funds rate over time. When trying to predict something, you want to look at similar instances in the past.  There is a piece of research from a big-time firm that is […]

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P/E ratios: Forward or Backward?

The stock market is a market of stocks.  Think about how everyone chooses a stock investment. You can look at the history of earnings — and you should.  Past earnings show how the company has performed, the numbers are set, and our information is as good as possible. Good analysts do not stop there, since […]

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