While many analysts (us included) look to forward earnings (soft data) for clues on the future direction of stocks, it also pays to keep an eye on trailing earnings (hard data). It tells us what is happening on the current earnings front and the impact on present valuations. Click here to see how the current PE ratio on the Dow Jones Industrial Average is impacted by trailing twelve-month earnings per share.

Relative Value – DJIA and Russell 2000

Stock returns can be volatile during certain periods of fear or exuberance, but produce an average or mean return over long periods of time. In these charts, we compare the nominal (actual) performance of stocks relative to the mean return on the Dow Jones Industrial Average and the Russell 2000 from 1988 to date.

Recession Predictor

Many analysts use the spread in the yield curve (the difference between the 3-month T-Bill and 10-year T-Note) to gauge the likelihood of a recession. This chart shows an indicator tracking the yield spread as a percentage of the 3-month T-Bill. Since 1970, a rise above 100% on this indicator has always been followed by recession and a subsequent decline in equity prices.

Rule of 25

This chart measures one percent days. It is an indicator tracking volatility and counts the number of days over the previous 60 trading sessions where the S&P 500 Index traded up or down by 1% or more. Backtesting of this model since 2010 suggests that a market bottom is reached once the counter hits or exceeds 25 days.


All indices are unmanaged and investors cannot invest directly into an index. Past performance does not guarantee future results.