Bullish Prospects Surface

Physician's Money Digest, July15 2003, Volume 10, Issue 13


Leading money managers arevery confident in the stock marketfor the balance of the year, accordingto 2003 Big Money Poll.More than 61% of those surveyedwere "bullish" on the market's long-termprospects; just 11% were "bearish."The consensus asset allocationrecommended among the 145 moneymanagers was 64% equities, 23%fixed income, and 13% cash.

Today's points:

With the markets' recent upwardedging, how are physician-investorsable to spot good stock prices?Though S&P 500 stocks are presentlytrading at about 30 times earnings,twice the historic average, ifyou use estimated earnings for thecoming 12 months, the S&P 500'sprice/earnings ratio is a more modest17. Bullish investors, however,are looking at the earnings yield(ie, earnings per share divided bythe share price). Some market mavenssay that when the earningsyield is higher than the yield on 10-year US Treasury bonds, it's a greenlight for stock buyers. Currently, the S&P 500 earnings yieldis running about 2 percentage pointsabove the yield on a US Treasurybond.