On US equities’ multiple expansion

OK, one more post before I hit the bed to sleep again here. After I released my daily commentary a few weeks ago about S&P500 earnings, wages and multiple expansion, there has been a lot of talk about multiple expansion in the media. I think this talk is warranted because this is the crux of the rise in shares right now.

Here is what I said:

First, what is interesting is that the Dow has hit a new high and the S&P500 is really close despite the fact that S&P500 earnings peaked in Q1 2012. Now, we only have numbers through Q3 2012 but it seems likely that the Q4 2012 will still be below the Q1 2012 peak. What that says is that something other than earnings growth is driving the market higher. An optimistic reading of this dichotomy would be that the market is correctly for...


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