Investing.com provides average year end forecast of 18050 for the DJIA based on the April poll of 25 analysts. How realistic is this target? The DJIA is currently trading at about 19x trailing earnings while the historical average of 15 is about 20% lower at around 14000 range. The market lows of last August and January of 15500 range was around 16.6 x trailing earnings. Analysed from a valuation perspective the DJIA seems overpriced. Technically the chart appears to be range bound with more downside than upside.
Another perspective is to consider the lower bond yields around the globe. The stock indexes could warrant a higher than average PE ratio. The earnings yield is the inverse of PE or the Earnings to Price ratio. Barrons reports DJIA earnings of $935 which gives us a current earnings yield of 5.29% and the DIA currently yields 2.48%. Both earnings and dividend yield offers a solid premium over the 10 year treasury yield which is currently around 1.61%. The DJIA is estimated to grow earnings over the next 3-5 years at an annual rate of about 7.8%
Whats your thoughts? I look forward to your comments and ideas.
Another perspective is to consider the lower bond yields around the globe. The stock indexes could warrant a higher than average PE ratio. The earnings yield is the inverse of PE or the Earnings to Price ratio. Barrons reports DJIA earnings of $935 which gives us a current earnings yield of 5.29% and the DIA currently yields 2.48%. Both earnings and dividend yield offers a solid premium over the 10 year treasury yield which is currently around 1.61%. The DJIA is estimated to grow earnings over the next 3-5 years at an annual rate of about 7.8%
Whats your thoughts? I look forward to your comments and ideas.