Since The Dreme (Draghi Scheme) began shortly after the EU Summit, the P/E multiple on the S&P 500 has risen by a faith-defining 2x. This is the largest three-month rise in this indicator-of-indifference-to-reality since the initial burst rally off the March 2009 lows. Meanwhile, the actual earnings consensus is being marked down further, heading for an earnings recession as we pointed out last week [5]. It seems investors are too afraid not to believe in P/E miracles or perhaps it is just faith that central banks have it all under control and their 'promises' are as good-as-gold.
The S&P 500 seems 'managed' to a certain level - no matter what that means for EPS or P/E multiples, the spice must flow market must rise... (a 2x multiple increase since Draghi's initial utterances post EU Summit
[6]
As if the divergence was not enough, the 3 month rise in the S&P's P/E ratio (lower pane) is its highest since the initial V-bottom recovery in 2009...
[7]
Charts: Bloomberg and JPMorgan