By: Dividend Sensei
The current pullback has done little to alleviate the broader market’s overvaluation problem.
S&P 500 Valuation Profile
|Year||EPS Consensus||YOY Growth||Forward PE||Blended PE||Overvaluation (Forward PE)||Overvaluation (Blended PE)|
|12-month forward EPS||12 Month Forward PE||Historical Overvaluation||PEG||20-Year Average PEG||S&P 500 Dividend Yield||25-Year Average Dividend Yield|
(Sources: Dividend Kings S&P 500 Valuation & Total Return Potential Tool, F.A.S.T. Graphs, FactSet Research, Brian Gilmartin, Reuters/Refinitiv/IBES/Lipper Financial, JPMorgan, Ed Yardeni, Multipl.com)
How big of a problem are stocks trading at 23X forward earnings and a 40% premium to historical fair value?
Moody’s has just updated its long-term baseline economic forecast and it points to a potential lost decade for stocks.
“Long-term interest rates will steadily increase from 2021 onward, with the 10-year rate reaching 4.1% by 2030. Unless there is significant compression of the equity risk premium, the fundamentals will then weigh on values over the decade.” – Moody’s (emphasis added)
Today 44% of US stocks are in a bear market, including high-quality, fast-growing, high-yield names which are outrageously undervalued,.
Discover three such names that yield a safe 5% to 7%, offer 27% to 36% CAGR long-term return potential, and are poised to benefit from the coming economic recovery and rising interest rates that Moody’s thinks will cause the S&P 500 to deliver negative returns over the next 10 years.