FedEx Corporation (FDX) Stock Forecasts

Summary

Our stock-to-bond asset allocation model, which we call the Stock-to-Bond Barometer, shows that bonds are the most valuable asset class in the market right now. But not by much. The model takes into account current levels and forecasts of short- and long-term government and corporate bond yields, inflation, stock prices, GDP and corporate earnings, among other factors. The result is expressed in terms of standard deviations from the mean, or sigma. The model’s average, which goes back to 1960, is a modest premium for stocks of 0.16 sigma, with a standard deviation of 0.97. In other words, stocks typically sell at a small valuation premium. And that’s where we are today. The current valuation level is a 0.19 sigma premium for stocks, just above the historical average but well within the normal range—and down from last month’s 0.34 sigma premium. Other valuation measures also show reasonable multiples for stocks. The current forward price-to-earnings ratio for the S&P 500 is about 20, which is within the normal range of 13 to 24. The current S&P 500 dividend yield of 1.3% is below the historical average of 2.9%, but is 29% of the 10-year Treasury yield, compared with the long-term average of 39% and the historical low of 18% in 1999. In addition, the spread between the S&P 500 earnings yield and the benchmark 10-year government bond yield is about 320%.