Valuations Hit 26-Year Low As Profits Surge And Stocks Languish

Companies in the S&P 500 Index will earn +18% more in 2011 than in 2010, according to a survey of 9,000 analysts, BUT stock prices are NOT reflecting that rate of growth. The S&P 500 has corrected since April 29 on concerns over China’s slowing economy, the potential Greek default and the end of the Federal Reserve’s $600 billion stimulus program.  Negative reports on housing, employment and manufacturing have also sent some investors to the sidelines. As a result, even if companies posted no growth in 2011, price-earnings ratios would be lower than on 96% of days in the past two decades, according to a Bloomberg analysis.