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Dividend Discount Model S&P 500
(potential fair valuation / UPDATE)
In Oct. and November 2018 the U.S. 10Year-Treasuries reached a yield of ca. 3.25%. Reminder: Around Christmas Eve in 2018 the S&P 500 reached then its intermediary LOW at around a level of ca. 2,336 points...(I did not...
Legend:
"DDM = Dividend Discount Model"
"SPX = S&P 500 / U.S. Stock-Market Index" (see following chart)
...look up the exact level).
Now (Jan. 2020) that we are sitting at a 10YR-Treas.-level of ca. 1.81% and a possible S&P 500 earnings-"guess" of ca. 172 USD in the S&P 500 (see Matrix above and FactSet-estimates in the barchart below) one would reach a potential intersection-point of ca. 3,600 points in the S&P 500 (see Matrix above).
>> Well, still above the current level of ca. 3,316 points. To be exact, this would imply an upside-potential of another +8% in the U.S. Stock Market during the current year (who knows if we will eventually also end this year around that level...).
Just for cross-check reasons I made a quickNdirty Cash-Flow Valuation of some of the most relevant DOW-Jones components and reached the conclusion, that also the old DOW-Jones Index has a potential of more than 10% plus within the next quarters - therefore easily crossing the magic 30k-line...
(Currently the Dow Jones Industrial Average is sitting at 29,297 point as per market close of Thursday 17th January 2020).
WoW - Low interest rates (and bond yields) can really have a big impact on Stock-Market valuations, aka: FAT TAILWIND.
cheers Ralph
please also find the elder "DDM-Snapshot" from April 2019 here:
www.private-investment.at/posts/view/1239
