Forward P/Es Falling Faster Than Forward Earnings Are Rising

The forward P/Es of the S&P 500/400/600 ended the day at 16.5, 12.1, and 11.7. Forward earnings, a proxy for analysts' consensus expectations over the next 52 weeks, were at record highs during the May 12 week for all three S&P composites.Investors continue to cut valuation multiples as though a recession is imminent with revenues and profit margins taking dives. Industry analysts continue to raise their earnings estimates as though the economy is in an inflationary boom with profit margins likely to remain high. Our Blue Angels framework (below) is a handy way to monitor these developments.