In the first week of March 2009, the sentiment on Wall Street was very negative. Analysts started adjusting their earnings expectations down to match sentiment. By the end of the week the sellers were overtaken by buyers and now the stock market has moved over 20% in record time.
The general expectation was that the stock market would retrace some in April due to earnings season. So far nearly two thirds of earnings released have beaten expectations. Since expectations have been better than expected, the stock market has held up.
Sales and earnings for most of the companies who released are way off over last year. Companies who beat typically had their earnings expectations adjusted lower at one point during the first quarter.
When the market was heading into the abyss of 6500 on the Dow Industrial average, Wall Street lowered their expectations of the future. Expectations now are being raised since the market has made a record jump to speedy recovery.
Wall Street seems to always over shoot their expectations. When they are bearish, the worst is expected. When Wall Street is bullish, the best case is expected. Expectations are just that, what someone expects to happen.
The markets generally move on expectations. If expectations are high then the bear is advantaged. If expectations are low, then the bulls have the leg up. Can the lofty expectations being set now be achieved? Some of Wall Street is starting to forecast the conclusion to this financial crisis by summer’s end, what if it does not happen?
