IS UNUBERANCE A WORD?

While equity markets have risen sharply since bottoming in the spring of 2009, the rally has been accompanied with an even sharper increase in corporate earnings. The result is that the global rally has yet to lift the market's price/earnings (P/E) multiples to even their averages of the past four years.

The S&P 500 Index is currently sporting a P/E of 14.15-x on 2012 earnings and 11.67-x for 2013. These multiples compare quite favorably with the four-year average multiple of 15.6-x.

Germany's DAX Index is currently priced at a P/E of 11.87-x versus its four-year average of 17.4-. The Hang Seng Index of Hong Kong is priced at a multiple of 10.0-x with a four year average of 13.6-x. Brazil's Bovespa Index is priced to an 11.4-x multiple versus its four-year average of 14-x.

Another interesting indicator to consider is the investor sentiment reading for bulls and bears. Since the start of the year, bullish sentiment has declined from 48.88 to 43.69, while bearish sentiment has increased from 17.16 to 27.51. Since the start of the stock market rally in March of 2009, bullish sentiment readings have averaged 39.26 with a high read of 63.3 and low read of 18.92. During the same period, the bearish reading

has averaged 34.99, with a high read of 70.27 and a low read of 16.4.

From these data points it is hard to find any hint that exuberance is being priced into the market.

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