Why You Maybe Shouldn’t Trust Analysts

More analysts are missing the mark these days, according to Bloomberg: Their accuracy in predicting U.S. profits dropped to the lowest level in at least 16 years last quarter. Earnings estimates from analysts have matched results for only 6.7 percent of companies in the S&P 500 that have reported second-quarter earnings—the fewest since Bloomberg began tracking this information in 1992, the report said.

Accuracy peaked at 30 percent in the fourth quarter of 2000, the year Regulation Fair Disclosure, known as Reg FD, was adopted, and has fallen for six of the seven years since.

Essentially, Reg FD says publicly traded companies must disclose information to the general public at the same time as analysts. Therefore, companies are more cautious in releasing information, one source said.

In related news, S&P companies are expected to be down 29 percent in the second quarter, which would be the fourth straight quarter of falling profits, reports the Wall Street Journal. (About 96 percent of S&P companies have so far reported results.)

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