INVESTORS have spent several months deciphering the mixed signals from the US economy, and yet the S&P 500 has kept moving higher, slowly but surely, putting it just shy of the 2,000 mark.
With its Friday close, the S&P would need just a 2.5 per cent gain to vault the 2K level – something most did not expect during the depths of the recession.
What’s unclear is whether the market is starting to become overvalued. The forward price to earnings ratio of the index is now 15.8 and would rise above 16 if the index hits 2,000 and earnings estimates remain the same.
Still, the economy notably contracted in the first quarter of this year. As always, hope of a takeoff in growth persists among equity managers, boosted on Friday by employment data showing the economy finally recouped all the jobs lost during the recession.