Mike Green & Bob Elliott: "Hard Landing" In Store For Economy In 2024
Forward Guidance
The Relationship Between Stock Prices and Earnings Expectations
Stock prices can be influenced by analysts raising earnings estimates, leading to a question of whether rising stocks cause higher estimates or vice versa. Market pricing suggests a belief in elevated earnings growth, especially in sectors not traditionally focused on dividends. Analyst expectations are generally high since stocks are considered relatively cheap compared to bonds. Market pricing indicates a strong expectation for future earnings growth, with some investors buying stocks based on anticipated high earnings. The discrepancy between market expectations and actual earnings performance may lead to eventual adjustments, potentially narrowing the gap between high stock prices and low bond prices.
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