Earnings Expectations

The markets short term movements may be influence by a lot of factors, but over the long run, it is earnings that is moving the market. If corporate earnings are expected to go up, the market generally goes up, and vice versa. Sometimes, the price rise is not immediate; however, eventually, the "earnings-up = market-up" concept generally holds true. Therefore, we will update the expected earnings for the next quarters and year.  

Note: It is possible for the market to go up when bad earnings come out. This happens when the "feeling" is that the stock has hit bottom and future expectations are positive. In much the same way, when good earnings come out but future expectations are negative, prices generally fall. The common quip is: "Buy on the rumor (of good news) and sell on the (actual good) news." On Wall Street, future expectations are more important than the current news.

You may click here to analyze the earnings vs. S&P 500 price relationship. Notice, also, that in most cases, the market topped out before actual lower earnings came out, whereas in the years that had lower earnings, the market generally went up.

For the latest update please log in or subscribe to our services.