This is the Dec. commentary by Dr. David Nelson of Legg Mason. "Don't be distracted by the noise. The U.S. economy is reaccelerating and 2011 should be a good year for U.S. stocks"
"As mentioned earlier, Steve East's valuation model for the S&P 500 based on NIPA profits indicates fair value to be 1489 currently, rising to 1638 by the end of 2011 based on assumed profit growth of 7.5%. Our own internal valuation model puts the fair value P/E multiple of the S&P 500 at over 20 times, versus its current multiple of 14 times, based on 2010 estimates, and less than 13 times, based on 2011 forecasts. Goldman Sach's portfolio strategy team has recently introduced a year-end 2011 S&P 500 target of 1450. Obviously, none of these forecasts guarantees that the market will rise in 2011, but it does indicate that a number different analytical approaches to valuation suggest that the market is attractively valued, and worthy of serious investor attention."
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"As mentioned earlier, Steve East's valuation model for the S&P 500 based on NIPA profits indicates fair value to be 1489 currently, rising to 1638 by the end of 2011 based on assumed profit growth of 7.5%. Our own internal valuation model puts the fair value P/E multiple of the S&P 500 at over 20 times, versus its current multiple of 14 times, based on 2010 estimates, and less than 13 times, based on 2011 forecasts. Goldman Sach's portfolio strategy team has recently introduced a year-end 2011 S&P 500 target of 1450. Obviously, none of these forecasts guarantees that the market will rise in 2011, but it does indicate that a number different analytical approaches to valuation suggest that the market is attractively valued, and worthy of serious investor attention."
Read the complete article
