Salient to Investors:

Share-price targets are rising at the fastest rate in two years.

Bulls say the economy may gather enough momentum to expand on its own. Bears say price appreciation without profit gains shows declines are inevitable.

Joseph Tanious at JPMorgan Funds says there’s a tight relationship between confidence and multiples, and confidence, though depressed, is clearly rising as the US economy improves at a slow pace.

The S&P 500 P/E ratio remains below the long-term average of 18.6. Reaching analyst price forecasts would send the S&P 500 more than 6.5 percent above the all-time high of 1,669.16. Operating profits projected to reach a record $108.40 a share in 2013 would give the index a valuation of 16.4, versus 17.5 at the market peak in October 2007.

Joe Kinahan at TD Ameritrade sees every reason to believe that multiples should increase.

S&P 500 income rose an average of 4.3 percent in each of the last 5 quarters, versus the 28 percent average for 2010 and 2011.

Robert Royle at Smith & Williamson Investment Mgmt said we need a strong acceleration of earnings in Q3 and Q4 for the full-year estimates to come through – you will have multiple expansion in an economy not growing fast enough.

The median economist expects US GDP to increase 1.9 percent in 2013 versus 2.2 percent in 2012.

Analysts expects profits in Q3 to rise 5.5 percent and Q4 to rise 11.2 percent, but since 2009, their projections have declined 6.2 percent in the 6 months leading up to a quarter’s end.

73 percent of S&P 500 companies exceeded forecasts by an average of 5.1 percent for Q1, 51 percent reported sales below estimates.

Analysts have boosted price estimates for the S&P 500 by 11 percent since December 28, the fastest rate since July 2011.

Economists expect US GDP will expand 2.7 percent in 2014.

448 stocks in the S&P 500 trade lower than their price estimates, the most since December.

Phil Orlando at Federated Investors is bullish saying we are only halfway through the multiple expansion he expects.

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