While economists and the media are busy debating over whether or not the US economy is in or on the verge of a double dip recession, US companies are busy posting record earnings. According to S&P, with 88.1% of US companies having reported, Q3 operating earnings are on pace to total $25.42 for the S&P 500. On a four quarter trailing basis, earnings for the S&P 500 are set to total $94.77, which would eclipse the old record of $91.47 set in Q2 2007.
If you thought the market was volatile, the swings in earnings have been just as violent (which is partly responsible for why stocks have become so volatile). Since the prior record in earnings for the S&P 500 was set just over four years ago, the S&P 500 saw earnings drop by more than 55% in a little over two years. After bottoming out in Q3 2009, earnings have now rebounded by 139% in the course of two years.
As shown below, based on current forecasts, earnings for the S&P 500 are expected to rise to $108.01 by the end of 2012. If, and this a pretty big if, analyst forecasts are correct, the S&P 500 is currently trading at a relatively meager 11.6 times next year's earnings.
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