This chart is going around the financial blogosphere via Morgan Stanley's Adam Parker and it is quite telling about why we have subdued P/E multiples among other reasons; there is a massive dearth of growth at this point in the S&P 500. Recall in the past 6-9 months we've been writing how without Apple (AAPL) and (pick one other stock depending on the quarter) there would be flat earnings growth for that specific quarter. But more broadly speaking for all of 2012, almost all the earnings growth has come from 10 S&P 500 companies while the other 490 have little contribution. Outside of Apple it has ironically been very heavily due to our too big to fail banks (which are of course now essentially government and Federal Reserve backed entities – almost impossible not to make money in these companies at this point).
A striking chart from Morgan Stanley's Adam Parker shows that 2012 earnings growth among S&P 500 companies was highly concentrated, with 88 percent of it coming from the top 10 firms. I was even more struck by the inequality within the top 10. Just four companies—Apple, AIG, Goldman Sachs, and Bank of America—together provided a majority of overall earnings growth among large-cap companies.
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