Thursday, August 19, 2010

Earnings Yield

From Michael Santoli's column in Barron's:

J.P. Morgan noted last week that the forward "earnings yield" of the Standard & Poor's 500 based on current forecasts is 8.1%, while high-yield bonds were at 8.3%—the narrowest spread in history (it has averaged 5.1% since 1987).

The above, of course, guarantees nothing in the short run but sets up reasonably well if your time horizon is measured in several years.


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