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Corporate earnings have been flat for over a year, so they don't really explain why the S&P 500 still went up 15% from the 2018 highs. And now expectations are
by kgwgk 7y ago
Corporate earnings have been flat for over a year, so they don't really explain why the S&P 500 still went up 15% from the 2018 highs. And now expectations are down substantially and even for 2021 are below 2018 levels.
- paulpauper 7y agoif a $100 billion dollar company generates $10 billion of profit annually, then that is 10% returned to shareholders every year even if there is no earnings growth.
- kgwgk 7y agoSure, with no earnings growth and no price increase shareholders would be richer due to the cash returned via dividends. But that doesn't explain why the price you pay for $X in earnings is higher in one case than in the other. (Retained earnings could explain a minimal part of the increase.) There is no reason for that $100bn company to be a $110bn company next year if it has returned the $10bn it earned to shareholders and it's still going to earn $10bn.
- mslot 7y agoA reason could be that the yields on other forms of investment are going down. If buyers are willing to accept a 1% yield because they cannot easily get it anywhere else then the share price can go to $1 trillion, or even further if yield is expected to go up over time.