History says there is still room to run

Despite decidedly negative world events and lackluster economic data, the broad U.S. indices all posted solid, though unspectacular, numbers through August.

The SPY and Nasdaq Composite are both on track for solidly double-digit total returns while the DJIA and Barron’s 400 still have a fighting chance at 10% or better if an end-of-the-year rally materializes.

Has 2014’s rise sent the averages into crazy-high territory? Not really. Improved EPS and increased dividends show only minor changes in the P/E ratios and yields versus 52-weeks ago. The DJIA’s multiple, at 15.2x, is just 1.9% above its year ago level. The SPY’s P/E has expanded by 6.6% but remains far off a nosebleed valuation. Yields on the DJIA and SPY have dipped somewhat due to share price appreciation but now run 2.19% and 2.00% respectively. Both far exceed what is available on an short-term cash instruments.

Read more on this story at Guru Focus.