Salient to Investors:

  • 48 of the 67 companies reporting earnings exceeded analysts’ estimates
  • S&P 500 earnings are expected to exceed $1 trillion in 2013, 31 percent more than when the index peaked.
  • The S&P 500 P/E is 9.8 percent below the 6-decade mean.
  • Analysts predict S&P 500 earnings will rise 8 percent in 2013 to a record $110.10 a share.
  • Since 1954, S&P 500 valuations have averaged 16.4 times earnings – 17.5 the 2007 peak, 33 during the Internet bubble in 2000.
  • The S&P 500 took 25 years to reach a new high after the Great Depression and 3 years on average for the index to surpass previous records since then – 7 years in the 1970s and 2000s.

Leo Grohowski at BNY Mellon Wealth Mgmt said Corporate America has done an incredible job following the recession.

Laszlo Birinyi says the rally is entering a final phase as investors on the sidelines capitulate and buy – the last phase is very strong.

Chris Hyzy at US Trust said valuations imply the market is ripe for a new business cycle and a market that tracks profit growth.

Wayne Lin at Legg Mason said we’re starting from a better fundamental base now, driven by non-leveraged economic growth – a big difference to 2007.

US corporations accounted for 168 of the top 500 companies at the end of 2012, versus 157 five years ago, while their profits rose to 36 percent of total income from 32 percent.

Analysts expect S&P 500 earnings to exceed $120 a share by 2014, double the level in 2008, and the biggest increase since the 142 percent gain amid the tech boom from 1993 to 1999. The average of 15 Wall Street strategists expects the Index to rise 8.1 percent in 2013. 8 expect the index to surpass 1,565.15.

Joseph Tanious at JPMorgan Funds said profit growth is slowing after a three-year increase and the market won’t reach a record unless multiples expand, while consensus estimates are still too high. Tanious said companies have trimmed all of the fat they can, and the expansion is unlikely to push earnings any higher.

Economists expect the US economy to grow 2.8 percent in 2014 and 2 percent in 2013.

Howard Ward at Gamco Investors expects a new high in 2013, driven by the strongest inflows into equity funds since 2000, an economy continuing to heal,  and retail investors paying attention.

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