No Breadth to this Sell-Off

“Each of the market reversals of the past few weeks has in common that they represented widely held positions — long equities, overweight small caps, overweight tech, underweight emerging markets, and short duration. If there were greater worries about the economy or other downside risks, then we should have seen the dollar rise, credit and swap spreads widen, and emerging markets underperform. Correlations across risk assets should have risen. None of this has happened. There is no breadth to this sell-off.” (JPMorgan)


End of QE3

Credit Suisse have earlier estimated that the end of QE3 would cost the S&P 500 at least 15 %. The market has proceeded to advance beyond the market top set by CS. Remains to be seen if they are right when estimating the current down-side potential.

End of QE3

Unexpectedly Low Borrowing Costs

“Eurozone governments are taking advantage of unexpectedly low borrowing costs to push ahead with debt issuance, with some countries further ahead in their debt raising plans than in any year since the start of the eurozone crisis. Across the currency bloc, debt agencies have raised 29 per cent of their estimated 2014 funding goals, according to calculations by Barclays – more than in any year since 2010.” (FT)

Earnings Estimates

Analysts tend to be very optimistic and expectations tend to be very inaccurate. Gradually revised and reduced. Executives love to low-ball estimates and often they are going to great lengths to underpromise and manage expectations so they can deliver and beat consensus expectations.

Earnings Estimate

Forward earnings expectations throughout any given year.

Foward Earnings Adjustments