Looking back nearly 25 years, it has been an impressive period for the SPX. Net per share has
compounded at 6.6% annually which is a bit above the very long term average. However, the
SPX itself has grown at 7.8% as the p/e ratio has tilted higher in recent years, reflecting not
only low interest rates and inflation, but high confidence the longer run future will bring more
attractive performance.
The market is trading above the upper band of longer term ranges starting in the early 1930s,
again reflecting rising earnings and elevated p/e ratios. Noteworthy also is that earnings are
not yet enough extended to signify a top in cyclical economic performance.
The accompanying SPX chart makes clear the dramatic recent power of the market. SPX Monthly
Measures of longer term price momentum are running as strong as they have in over a quarter of
a century and the near term reveals no indications of decay as of yet.
When the market topped the previous historic highs during 2013, it signaled the onset of a new
bull market and not just a quantum cyclical bounce off the 2009 cyclical low. However, from
a practical technical point of view, the evidence would suggest the SPX should not do much
better than at present in the near term without some degree of negative price adjustment. The
'now' should be interesting because the boyz are hoping for a nice Santa Claus rally to wrap up
the year.
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