All of the "top down" indicators for nonfinancial profits I use have
taken the steepest drops in decades and point to sharp down
earnings for Q4 '08 and likely for Q1 '09 as well. The declines in
the indicators pitched steeply downward in Sept. '08, marking
a sharp change in the outlook for profits in short order. Small
wonder the stock market crashed during the same interval.
Now, the market is discounting a bad earnings quarter, so results
and corporate guidance looking forward as released will disclose
how ready investors are to sit through bad numbers now in lieu of
prospective recovery later in the year. On average, a market
bottom discounts the initial upswing in the earnings cycle by 6
months. So, even if the stock market does treat the oncoming
earnings news with a rude sell-off, one should not readily conclude
that the year is lost based on the current reports.
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