Feb

5

Victor Niederhoffer and crew at Daily Speculations recently updated an outlook for the S&P 500 index via Fed model analysis (based on a regression fit for 1980-2006), forecasting a 17.3% gain for 2007. This analysis is somewhat similar to our blog entry of 1/8/07, which uses historical data from our Real Earnings Yield Model and Reversion-to-Value Model to generate a comparable forecast. Stimulated by their update, we refresh our alternate perspective on Fed model dynamics.

To calculate valuation benchmarks, we use daily historical yields over the period 1990-2006 for the following: the 10-year Treasury note (T-note); the 3-month Treasury bill (T-bill); and the S&P 500 (using operating earnings yield - E/P - as calculated for our REY Model). To generate an outlook, we use the current Standard and Poor's operating earnings projection for 2007.

cxoadvisory.com/blog/


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