S&P 500 EPS Trend Watch (2012 vs. 2007 and 2000), Earnings Yield Since 2011 - Charts

Using Standard & Poor's data, I put up a chart comparing S&P 500 Earnings Per Share and Operating Earnings Per Share on a quarterly and trailing twelve-month (TTM) basis since 1999 (ending Q3 2012). Is it just me, or does it look like S&P EPS is starting to roll over here (or very soon).

Unfortunately, I couldn't embed the interactive chart which shows all the data from the Google spreadsheet. But to see two years worth of S&P 500 Quarterly EPS, TTM EPS and Quarterly Operating EPS data on interactive charts, click the links which direct you to ycharts.com.

To see how EPS is being priced on the market, look at this chart comparing the S&P Earnings Yield, S&P 500 Operating Earnings Yield, S&P 500 Price, and 10-year Treasury Note Rate (now at 1.72%) since Q2 2011 (via ycharts). You can see that the S&P earnings yield has been trending down since it peaked in Q3 2011, or when the market bottomed in October 2011 after the post QE2/debt ceiling/S&P downgrade crash.

S&P 500 Earnings Yield Chart

So either investors are now accepting a lower earnings yield (higher P/E ratio) during this EPS soft patch (quarterly EPS estimates rise in 2013, according to S&P's data), or they are betting on lower Treasury yields going forward via more QE (money printing) by the Fed and disinflation expectations. But, if they are wrong, and interest rates spike because of inflation expectations (which really means the risk of QE ending and rate hikes), or S&P EPS plummets from here, the S&P 500 could get repriced to the downside and could even enter a new bear market.
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