JP Morgan Funds Twitter account posted a nice graph on Twitter today showing that, even while the S&P is trading near an all time high, this rally could go a lot further. The S&P 500 is still trading below the average forward P/E of the last 30 years according to the graph. According to this chart the S&P 500 is fairly valued and we are not experiencing some kind of bubble. Of course earnings will need to keep growing in the future to keep justifying a higher price.
Earnings for Q1 2013 are coming this month. Should you be surprised when a company beats its earnings estimates? No says Bespoke Investment Group. They posted an article a while ago showing that most companies beat the earnings and revenue estimates made by analysts.
As most stocks have a short ‘pop’ after an earnings and revenue beat you could of course use this information to make a little speculative bet by going long a few stocks on the day that they will be reporting earnings.
Although, of course, results from the past provide no guarantee for the future.