If you had read my previous post on
What Have We Got After 8 Years of Easy Money?, you would know that the US equity market has gone on an 8-year bull run even though many industries (at least those in Singapore) are facing poor business and/or low margins. Fig. 1 below shows the performance of S&P500 index since 2012, which is mostly on a straight upward trendline.
Fig. 1: S&P500 Index Since 2012 |
Yet, when you look at the earnings of S&P500 companies over the same period, they have been relatively flat. See Fig. 2 below (source:
Cash Piles at American Companies Are Shrinking). This is due to the lacklustre global economy since 2012.
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Fig. 2: Flat Earnings Since 2012 |
Thus, on one hand, we have flat earnings, but on the other hand, we have rising share prices that have increased by about 73% since 2012. The ......