FedEx Corporation (FDX) Stock Forecasts

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Our stock/bond asset allocation model, which we call the Stock Bond Barometer, indicates that bonds are the asset class that offers the most value at the current market juncture. But not by much. The model takes into account current levels and forecasts of short-term and long-term government and corporate bond yields, inflation, stock prices, GDP and corporate profits, among other factors. The output is expressed in standard deviations from the mean, or sigma. The average value of the model, going back to 1960, is a modest premium to equities of 0.16 sigma, with a standard deviation of 0.97. In other words, equities normally sell for a slight premium valuation. And that’s where we are. The current valuation level is a 0.19 sigma premium to equities, just above the historical average but well within the normal range — and down from the 0.34 sigma premium last month. Other valuation measures also show reasonable multiples for equities. The current forward P/E ratio for the S&P 500 is about 20, which is within the normal range of 13-24. The current S&P 500 dividend yield of 1.3% is below the historical average of 2.9%, but is 29% of the yield on the 10-year Treasury note, compared to the long-term average of 39% and the all-time low of 18% in 1999. Furthermore, the gap between the S&P 500 earnings yield and the yield on the benchmark 10-year Treasury note is about 320 bases