Peak EPS
Low Single Digits?
We encourage diversity of thought in our shop, but even pessimists among our ranks have a hard time making the case for a ten-year negative return for U.S. stocks, which was recently predicted by the founder of a large hedge fund.
“Peaking” Into The Future
Peak P/E has just moved into its top decile on a postwar basis. If the recent rally is indeed the first roar of a new bull, then this is a bull that’s a “baby” on a calendar basis, but quite elderly from a “character” perspective.
Pricing In “Peak” EPS
A recent theme in our valuation work is that we no longer need to assume a full-blown “reversion to the mean” to illustrate current U.S. stock market risks: Even a reversion to “old” bull market highs in ratios like S&P 500 Price/Sales, Price/Cash Flow, and Normalized P/E would result in bear-sized losses.