Submitted by Mark Hanna
Courtesy of MarketMontage. View original post here.
While Apple (AAPL) is now the largest company in the S&P 500 (zoom zoom past Exxon), its impact on the aggregate earnings growth for the entire index is staggering.
- Including Apple, the earnings growth rate for the S&P 500 is thus far running at 8.4%
- Excluding Apple, the earnings growth rate for the S&P 500 is thus far running at 5.3%
I think helps to explain, in part, the ‘cheap valuation’ of the market when compared to aggregate earnings – despite an ultra low Treasury yield. When 20-30% of your growth curve is due to 1 company, it speaks to quite a dramatically slower growth trajectory for the rest (499 companies) of the pack.
Now if it is fair to exclude Apple when observing “the market” is another debate but no one can argue that this company is not weighing heavily on aggregate measures.
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