DC Lite #300

"There is a new S&P 500 CAPE ratio to consider"

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Daily Chartbook
February 12, 2025

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1. CPI. "Inflation was firm in January, no question about it, derailing the case for further 'recalibration' rate cuts before mid-year."

2. PPI. "After several years of focusing on the CPI, the PPI might merit more attention in coming months. Any price increases to front-run tariffs may show up in January's PPI, which is out on Thursday."

3. Rotation. "Here's the thing about bull markets, when former leaders struggle to continue their ascent, other areas of the market make up for it and help drive the indexes higher. That's what's happening here. Financials, Software, Comms, Consumer Discretionary. Not AAPL MSFT NVDA & Semis."

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4. Top 10 vs. Bottom 490. "The 10 largest companies in the S&P 500 index trade at 27x earnings, compared to 20x for the other 490 companies."

5. Current Constituent CAPE. "There is a new S&P 500 CAPE ratio to consider, one which adjusts historical earnings for index adds/deletes. This is a better approach and shows US stocks are nowhere near as rich as the late 1990s."

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