Earlier this year – at the peak of the latest bear market rally – I met Abby Cohen – the ever bullish equity markets expert at Goldman Sachs who predicted a 25% equity rally for 2008 and is making again a similarly bullish call for 2009. I asked her if we disagreed on earnings or on the multiple (P/E). It turns out that our forecast for earning per share for S&P 500 firms are similar: 50-60 range for me, 55-60 range for her. But she argued that a P/E in the 1012 range was too low as investors would ignore the bad earnings numbers for 2009: if a rapid recovery of earnings were to occur in 2010 and beyond investors would discount the 2009 bad number and assign to them a much higher multiple of 17 or even more.
Tags: 2009 rally