Even before the credit crisis really slammed stocks, everyone knew earnings expectations were too high, but Paul Kedrosky at Infectious Greed says the sharp drop in earnings forecasts for 2009 is pretty amazing.
He says estimates are "coming down faster than in any six-month period I've seen, and there are more cuts coming," and points to this slide from John Maudlin for 2009 estimates on the S&P 500:
March 20 $81.52 April 9 $72.60 June 25 $70.13 August 29 $64.66 September 10 $58.57 October 14 $48.52
That drop is pretty amazing, and the big decline between September and October really shows just how surprised Wall Street was at the severity of the credit crunch. What it means is that investors hoping for a rally in stocks are still on the wrong side of profit expectations. Shares may be beaten down enough to keep further declines from setting in, and credit may be a bit better, but ongoing lowering of basic expectations for the health of American companies should still keep investors on edge.