View on the U.S. stock market (S&P 500) - Part 1

To assess the U.S. stock market,

(1) Relationship between the U.S. stock market and EPS

(1a) EPS forecast　　ISM　　Changes in interest rates (leading indicators)

(2) PER and changes in interest rates

(2a) PER and interest rates

(3) PER and money supply growth rate

Actually, MZM would be preferable, but since no longer published, M2 is used as a substitute.

(4) Stock price = PER × EPS　(2) and (1a)　(3) and (1a)

Approach from the above, among other things.

In addition,

(5) Relationship with GDP

(6) Relationship with credit balance

and so on, there are various views.

First, (1) the relationship between the U.S. stock market and EPS (refer to the graph)

(A) The U.S. stock market generally moves in tandem with corporate performance (EPS).

(B) At present, it feels expensive. Quantitative easing is the background. Market expectations are anticipating future earnings.

(C) Price corrections occur when corporate earnings (EPS) deteriorate. If current earnings forecasts are correct, the uptrend should continue, and a significant correction should not occur.

(D) In this approach, market expectations depend on earnings forecasts. The general consensus forecast is roughly as shown in the figure, but is that acceptable?

The forecast for corporate earnings (EPS) will be covered next, but I have replaced the EPS in the above figure with that forecast.