Q1 earnings season is on.

And profit expectations are not good. Actually they are very bad.

Here’s a chart showing the biggest quarterly drop since 2009:

Earnings drop

Should that scare you? Should you sell everything?

Well, you’re not the only one who’s seen it. Everyone has.

And what everyone knows is not worth knowing! 

Markets are not moved by the expected events. Expected events are already baked into the price.

If you expect something you adjust your current actions.


The other way to look at the chart

Low expectation may actually be a good thing as they are obviously easier to beat.

Also, how come we know the earnings will not be good and yet the market is rallying? Is it due to all the buybacks? Is it due to low yields which make stocks comparably cheaper?

I don’t know. But I do know there’s a strong bid underneath and I do not want to stand in it’s way.

Whatever fundamental reasons are there price aggregates them all.