The S&P 500 has risen 3.2 percent so far this year, extending 2012’s 13 percent surge. Yet the benchmark gauge is trading at 14.8 times reported earnings, compared with an average of 16.46 since 1954, according to data compiled by Bloomberg.
“On the positive side of the ledger we’ve got at least what I consider to be undemanding valuations for stocks in general,” said Norm Conley, chief executive officer at St. Louis-based J.A. Glynn & Co, which manages about $975 million. “We’ve got earnings season kicking off here and so far no huge bad surprise, so that is an incremental positive.”
The Dow is better positioned to set a record now that its transportation-stock counterpart has done so, according to Richard Moroney, editor of the Dow Theory Forecasts newsletter. The Dow Jones Transportation Average has led the Dow industrials throughout the rally which started in March 2009. Yesterday the Dow transports closed at 5,639.64, an all-time high. The average had climbed 6.3 percent for the year, its best performance through Jan. 15 since 1987.
“It’s a legitimate move,” Moroney, who serves as the chief investment officer at Horizon Investment Services LLC as well as the newsletter’s editor, said yesterday in a telephone interview. “I take it as a positive.”
All 20 companies in the Dow transports had gains for the year as of yesterday. Delta Air Lines Inc., the world’s second- largest airline, set the pace by rising 15 percent. Most beat the Dow industrials’ 3.3 percent advance for 2013 as well.
Fourth-quarter earnings reports will largely determine whether the industrials reach a record any time soon, according to Moroney. The average would have to advance 4.7 percent to surpass its peak of 14,164.53 in October 2007. It’s 0.6 percent away from beating last year’s high.