16 Oct ftse pe ratio
After a roller coaster first half of 2020, now seems like a good time to review the CAPE ratio for the FTSE 100, FTSE 250 and, for US-focused investors, the S&P 500.
For example, since 2009 the US market has increased five-fold and is now more than twice as high as it was in 2000 and 2008. It is true that social media., the cloud, global online shopping, advanced internet search, electrical automotive industries, semiconductor IP, have massive future market TAMS.
To put it frankly if a person can’t work they can’t earn money they can’t buy goods/service in turn a company has reduced revenue leading to reduced profit leading to reduced employment and tax it generates for a state. In the future the market activity of this period may be compared to other strange events like Tulip mania. Forecast: GDP PPP Per Capita (PPP Intl $), Total Trade of Goods & Services: % of Nominal GDP (%), GDP: DE: Final Consumption Expenditure: Households (GBP mn), GDP: DE: Final Consumption Expenditure: General Government (GBP mn), Gross Domestic Product: sa: Market Prices (GBP mn), GDP: sa: DE: Final Consumption Expenditure: Households (GBP mn), GDP: sa: DE: Final Consumption Expenditure: General Government (GBP mn), GDP: sa: DE: Gross Fixed Capital Formation (GBP mn), Gross Domestic Product: sa: Market Prices: Annual (GBP mn), Gross Domestic Product: sa: per Capita: Market Price (GBP), GDP: GVA: CP: Administrative & Support Activities (GBP mn), GDP: GVA: CP: Arts, Entertainment & Recreation (GBP mn), GDP: GVA: CP: Information & Communication (GBP mn), GDP: GVA: CP: Public Administration & Defence (GBP mn), GDP: GVA: CP: Professional, Scientific & Technical Activities (GBP mn), GDP: GVA: CP: Wholesale & Retail Trade; Repair of Motor Vehicles (GBP mn), GDP: GVA: CP: Real Estate Activities (GBP mn), GDP: GVA: CP: Human Health & Social Activities (GBP mn), GDP: GVA: CP: Transportation & Storage (GBP mn), GDP: GVA: CP: Accommodation & Food Service Activities (GBP mn), GDP: Gross Value Added (GVA): Current Price (CP) (GBP mn), GDP: GVA: CP: Financial & Insurance Activities (GBP mn), GDP: GVA: CP: Other Service Activities (GBP mn), GDP: GVA: CP: Activities of Households as Employees (GBP mn), GDP: GVA: CP: Mining & Quarrying (GBP mn), GDP: GVA: CP: Electricity, Gas, Steam & Air Conditioning Supply (GBP mn), GDP: GVA: CP: Water Supply, Sewerage & Waste Management (GBP mn), PC: Liabilities: Stock: Debt Securities (DS) (GBP mn), HN: Net Acquisition of Financial Liabilities (GBP mn), Electricity: PD: Consumption: Total (TWh), Petroleum Production: Crude Petroleum (Ton th), Production Industries Turnover (PIT): Manufacturing (GBP mn), Nominal Residential Property Price Index (2010=100), Nominal Residential Property Price Index Growth (%), Real Residential Property Price Index (2010=100), Real Residential Property Price Index Growth (%), Consolidated Fiscal Balance: % of GDP (%), Forecast: Government Expenditure (GBP bn), Unemployment: sa: Male: Aged 16 & Over (Person th), Unemployment: sa: Aged 18 to 24 (Person th), Unemployment: sa: Aged 16 & Over (Person th), Unemployment: sa: Female: Aged 16 & Over (Person th), Weekly Hr Worked: Average: sa: All Workers (Hour), Employment: Workforce Jobs: SIC: sa: Manufacturing (Unit th), Employment: Workforce Jobs: SIC: sa: Services (Unit th), Employment: Workforce Jobs: SIC: sa: Trade, Repairs of Motor (Unit th), Real Average Weekly Earnings: sa: Total Pay: Whole Economy (GBP), Nom Avg Weekly Earnings: sa: TP: Finance and Business Services (GBP), Nom Avg Weekly Earnings: sa: TP: Manufacturing (GBP), Nom Avg Weekly Earnings: sa: TP: Construction (GBP), Nominal Average Weekly Earnings: sa: Total Pay (TP): Whole Economy (GBP), Motor Vehicle Sales: Commercial Cars (Unit), Motor Vehicle Sales: Passenger Cars (Unit), Consumer Confidence: Net Balance (% Point), Consumer Confidence: Overall Index (% Point), Average Annual Household Income (AAHI): Gross (GBP), Weekly Household Expenditure: Avg: All Expenditure (GBP), CPI: Food and Non Alcoholic Beverage Change (%), Forecast: Consumer Price Index Growth (%), HICP incl Owner Occupiers Housing Costs (HICPH): Total (2015=100), Harmonized Consumer Price Indices (HICP) (2015=100), HICP: Food & Non-Alcoholic Beverages (2015=100), HICP: Alcoholic Beverages & Tobacco (2015=100), HICP: Housing, Water, Electricity, Gas & Other Fuels (2015=100), Producer Price Index (PPI): Output: Net Sector: All Products (2010=100), PPI: Output: Net Sector: All Products: Excludes Duties (2010=100), PPI: Output: Net Sector: Excl Food, Beverages, Tobacco & Petroleum (2010=100), Exports: Medicinal and Pharmaceutical Product (USD th), Imports: Medicinal and Pharmaceutical Product (USD th), Exports: sa: BoP: Semi Manufactures (GBP mn), Exports: sa: BoP: Finished Manufactures (GBP mn), Exports: sa: BoP: Food, Beverages & Tobacco (GBP mn), Exports: sa: BoP: Total Manufactures (GBP mn), Imports: sa: BoP: Food, Beverages & Tobacco (GBP mn), Imports: sa: BoP: Total Manufactures (GBP mn), Imports: sa: BoP: Semi Manufactures (GBP mn), Imports: sa: BoP: Finished Manufactures (GBP mn), Foreign Portfolio Investment: Debt Securities (USD mn), Foreign Portfolio Investment: Equity Securities (USD mn), Foreign Portfolio Investment: % of GDP (%), Forecast: Current Account Balance (USD bn), Net International Investment Position (USD mn), Balance of Payments (BoP): sa: Current Account (CA) (GBP mn), BoP: Financial Account: Direct Investment: Assets (GBP mn), BoP: sa: Capital Account: Credits (GBP mn), BoP: sa: Capital Account: Debits (GBP mn), Balance of Payments: Current Account (GBP mn), BoP: sa: CA: Trade: Services: Exports (GBP mn), BoP: Financial Account: Other Investment: Assets (GBP mn), BoP: Financial Account: Direct Investment (GBP mn), BoP: Financial Account: Portfolio Investment: Liabilities (GBP mn), BoP: Financial Account: Portfolio Investment: Assets (GBP mn), BoP: Financial Account: Portfolio Investment (GBP mn), BoP: Financial Account: Financial Derivatives (GBP mn), BoP: Financial Account: Liabilities (GBP mn), BoP: Financial Account: Direct Investment: Liabilities (GBP mn), BoP: Financial Account: Other Investment (GBP mn), BoP: Financial Account: Financial Derivatives: Assets (GBP mn), BoP: sa: CA: Trade: Services: Imports (GBP mn), BoP: Financial Account: Other Investment: Liabilities (GBP mn), BoP: Financial Account: Reserve Assets (GBP mn), BoP: sa: CA: Trade: Goods: Exports (GBP mn), BoP: sa: CA: Trade: Goods: Imports (GBP mn), BoP: Current Account: Trade: Services (GBP mn), BoP: sa: CA: Primary Income: Credits (GBP mn), BoP: sa: CA: Primary Income: Debits (GBP mn), BoP: sa: Current Account: Secondary Income (GBP mn), International Investment Position (IIP): Net (GBP mn), External Debt: Others: Short Term (GBP mn), External Debt: Others: Long Term (GBP mn), Company Bankruptcy (CB): England & Wales (EW) (Unit), FDI: Outward: Asia: Others: ow: Hong Kong (GBP mn), FDI: Outward: Mining & Quarrying (GBP mn), FDI: Outward: Retail, Wholesale Trade, Repair of MV (GBP mn), FDI: Outward: Information & Communication (GBP mn), FDI: Outward: Electricity, Gas & Water (GBP mn), FDI: Inward: Retail, Wholesale Trade, Repair of MV (GBP mn), FDI: Inward: Professional, Scientific, & Technical Svcs (GBP mn), FDI: Inward: Electricity, Gas & Water (GBP mn), Foreign Exchange Reserves: Months of Import (NA), Debt Service Ratio: Private Non-Financial Sector (%), Credit to Private Non-Financial Sector (USD bn), Money Supply M0: sa: Notes & Coins (GBP mn), Intl Reserves: Foreign Currency (FC) (USD mn), Gross Lending to Individuals: Consumer Credit (CC): Total (GBP mn), UK Banks: Income and Expenditure (IE): Net Income: Total (GBP mn), UK Banks: IE: Net Dividends Received (GBP mn), UK Banks: IE: Net Interest Receivable (GBP mn), UK Banks: IE: Net Charges, Fees Commissions Receivable (GBP mn), Lending Rate: Outs: Households: Personal Loan (PL) (% pa), Lending Rate: Outs: Households: Mortgages (MG) (% pa), Sterling Exchange Rate: Monthly Avg: Euro (EUR/GBP), Real Effective Exchange Rate Index: BIS: 2010=100: Broad (2010=100), Government Bond Yield: Zero Coupon: 10 Years (% pa), Natural Gas Production: OPEC: Marketed Production (Cub m mn), Visitors Arrivals: Europe: France (Person th), Visitors Arrivals: Europe: Germany (Person th), Visitors Arrivals: Europe: Irish Republic (Person th), Visitors Arrivals: Europe: Netherlands (Person th), Visitors Arrivals: North America: USA (Person th), Residents Departure: Europe: France (Person th), Residents Departure: Europe: Irish Republic (Person th), Residents Departure: Europe: Italy (Person th), Residents Departure: Europe: Spain (Person th), Residents Departure: North America: USA (Person th), Business Confidence: Net Balance (% Point), Business Condition Survey: BoE Agent: Turnover: Retail Sale Value (Score), Dividend Yield: Actuaries Share Index: FTSE All Share (% pa), PE Ratio: Actuaries Share Index: FTSE All Share (NA), Market Capitalisation: UK Main Market: Total (GBP mn), Govt Secs: Gilt Holdings: Bank of England (GBP mn), Liner Shipping Connectivity Index (2004=100), Exports: Telecommunication Equipment (USD th), Imports: Telecommunication Equipment (USD th), Motor Vehicles Registered: Great Britain: Total (Unit th), Rail Statistics: National Rail: Open to Passenger Traffic Length (km), Bank of England: Gilt Repo and Stock Lending, Debt Management Office: Debt Securities Statistics, Debt Management Office: Gilt Issuance and Outstanding, Financial Times Stock Exchange: Dividend Yield, London Stock Exchange: Market Capitalisation, London Stock Exchange: Market Capitalisation: AIM Market, London Stock Exchange: Market Capitalisation: Main Market, London Stock Exchange: Number of Issues and Cancellations, London Stock Exchange: Number of Listed Companies and Securities, London Stock Exchange: Turnover: AIM Market.
Glad I’m not over exposed to the US market.
Personally I think 2008 was not so bad because it was a financial crisis i.e. Despite a strong rebound, the emerging markets' forward PE discount to developed peers remains exceptionally large (around 25%), likely a major catalyst of the former's recent outperformance. If the S&P 500 fell by 50% then it would be only slightly below fair value. This apparent disconnect between US market valuations and global economic conditions has led some notable investors to the conclusion that the US is very likely in a 24 carat solid gold stock market bubble. I leave you with one puzzle and another reason to be bullish about the FTSE 100.
In the background most rationale people can see that we are in due for a massive economic fallout due to COVID-19. The data reached an all-time high of 34.210 in Sep 2016 and a record low of 7.410 in Mar 2009. Source: FTSE Russell/Refinitiv. Data through August 17, 2020. After the panic subsided the FTSE 250 recovered to a more reasonable level.
Look at the FTSE 250, and the story is also absolutely stunning. Back-tested performance is not actual performance but is hypothetical.
That was exactly my plan. Earnings which are not retained by companies are typically paid out as dividends, and in March the FTSE 100 had a dividend yield of 6.6%, more than double its long-term average of around 3%.
I am trying to create a chart for the Price Earning Ratio for the FTSE 100 Index and would like to go back as far the tech bubble the year 2000.
It seems that the current CAPE for the FTSE 100 is close to par. Any representation of historical data accessible through FTSE Russell products is provided for information purposes only and is not a reliable indicator of future performance. If 10 year treasury yield is 0.55%; that implies a PE of 180, investors are being pushed further out on the risk curve, The complete absence of any inflation means that central banks have no reason to raise interest rates – and in fact the greater risk is deflation due to lack of demand, Another point to bear in mind is the huge distortion on the S & P 500 index of the major tech companies; if these companies are excluded, then many S & P stocks have rebounded, but are flat, Whether you like it or not, as the recent round of Q2 earnings releases demonstrates, these big tech companies have high rates of return on their assets and generate huge amounts of cash – and will likely continue doing so, Contrast that with the FTSE 100, where there have been dividend cuts at the banks and big oil companies.
By some measures, the FTSE 100 looks cheap, is it time to buy? I agree. I think the link between US and UK stocks is something of an old wives tale (apologies if that is no longer a politically correct phrase). If those hold true then your return will equal the dividend yield plus the dividend growth rate.
However, there have always been valid reasons why a market might be trading at a particularly high or low CAPE ratio, and ten years later most of those reasons have unwound and the index has reverted back to normal levels. With the average set at 22, that gives us an expected range of anywhere between 11 and 44, and that’s precisely the range covered by the rainbow chart.
I’ve seen examples suggesting the next decade in the US could see zero (or worse!) As for S&P forward returns, according to CAPE it’s about 40% above fair value, so that’s a 40% headwind which is easily enough to offset earnings growth for the best part of a decade.
I don’t want to argue the toss, but I just want to clarify this: “The CAPE argument about asset allocation assumes that all stock markets and their underlying economies are the same”. On the premise that many World stock-markets – including the FTSE are fairly valued or a bit cheap but the S&P is very expensive, does that help a U.K. value investor? Is it a simple “Yield + Growth Model” Google search?
Fantastic! Following on from my recent update of the FTSE 100’s CAPE ratio, it’s now time to look at the FTSE 250. Are you new to investing?
FTSE 250 price = 21,883; FTSE 250 PE ratio = 22.57; Average CPI index for 2019 = 107.8; We can get the FTSE 250’s 2019 earnings like so: FTSE 250 earnings = price / PE = 21883 / 22.57 = 970. Now THAT’S ‘high tech’ JOHN, any suggestions as to why the rest of the world has slavishly followed the Yanks, but the UK hasn’t?
Based on either metric, over the past decade, the EM discount has rarely been as wide as it is today. If you're just looking to read some investing articles, don't forget to subscribe to the free weekly email using the form above. So you now have a 10p capital gain as well as a 10p dividend income, so your total return for the year is 20p, or 20% of your starting investment. Your email address will not be published. This has forced me to take an international approach to look for quality companies.
Data through August 17, 2020. So regardless of whether you look at CAPE, cyclically adjusted earnings yield or dividends, one thing stands out: At the moment of peak fear in March the FTSE 100 seemed to offer very good value. The only problem is the price you have to pay. Jupiter AM: A good business but is it a good investment?
Start the clock at January 2000 and you see the FTSE 100 rise by about 20 per cent.
The FTSE 250’s ten-year average real earnings to 2019 is 901 index points, and with that we can calculate CAPE: As always, this tells us nothing unless we compare the current CAPE ratio to its long-term average.
However, even when applying equal sector weights to both indexes, the discount is halved to around 12%. And even if I do hold more cash, it wouldn’t be an extreme allocation of say 50% or more.
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