Investing.com provides average year end forecast of 18050 for the DJIA
based on the April poll of 25 analysts. How realistic is this target? The DJIA
is currently trading at about 19x trailing earnings
while the historical average of 15 is about 20% lower at around 14000 range. The market lows of last August and January of 15500 range was around 16.6 x trailing earnings
. Analysed from a valuation perspective the DJIA
seems overpriced. Technically the chart appears to be range bound with more downside than upside.
Another perspective is to consider the lower bond yields around the globe. The stock indexes could warrant a higher than average PE ratio. The earnings
yield is the inverse of PE or the Earnings
to Price ratio. Barrons reports DJIA earnings
of $935 which gives us a current earnings
yield of 5.29% and the DIA
currently yields 2.48%. Both earnings
and dividend yield offers a solid premium over the 10 year treasury yield which is currently around 1.61%. The DJIA
is estimated to grow earnings
over the next 3-5 years at an annual rate of about 7.8%
Whats your thoughts? I look forward to your comments and ideas.