25 Jan 2018 Ruane, Cunniff & Goldfarb Q4 2017 Shareholder Letter ( Portfolio )

Wall Street estimates for 2018 imply that the constituents of the Index [S&P 500] will have increased their per-share earnings 5% a year over the 12 years since Index profits peaked back in 2006. They also imply that in real terms—that is, adjusted for inflation—S&P earnings will have grown since 2006 at the same rate they’ve grown for the last fifty years. If the P/E ratio of the market holds steady from here, a 2% dividend yield and 5% likely earnings growth imply long-term stock market returns somewhere in the neighbourhood of 7% per year—a far cry from the 30% gain since June 2016 and the blistering 15% annual increase over the nine years since the crash in 2008.