One CIO Is ‘Horrified’ At Analysts’ Profit Complacency

One CIO Is ‘Horrified’ At Analysts’ Profit Complacency

"Economists have begun to cut their top-down economic forecasts for GDP, and yet fundamental company analysts are sitting there like deer in headlights not knowing what to do with numbers," Morgan Stanley Wealth Management CIO Lisa Shalett told Bloomberg's Jonathan Ferro earlier this week. It was a searing assessment that underscored rampant concerns about the stubbornness of earnings expectations in the face of gale-force headwinds to profitability, an extremely aggressive Fed and a US economy
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3 thoughts on “One CIO Is ‘Horrified’ At Analysts’ Profit Complacency

  1. Perhaps analysts are still reacting as they did when the was a strong tailwind.

    Back then, earnings really didn’t matter much beyond a day or two. So there were no strong reasons to ever cut estimates and risk offending the company. Now?

  2. To the institutional buyside, sellside analysts are valuable in many ways, with EPS forecasts being among the least important of their contributions. Buysiders will have their own forecasts, using the information flow from sellside and others.

    As a group, sellside analysts are certainly capable of turning the dials on their models to get EPS forecasts for bearish scenarios, but I’m not sure how much incentive they have to do that. Buyside firms don’t direct commission flow based on an analyst’s estimate accuracy; they reward information flow, idea flow, and access. There are also I-banking considerations.

    Basically, everyone knows that sellside earnings estimates changes lag major economic inflections and are okay with it.

  3. I know you disagree with this H man but to me the only analysis that matters is technical analysis. To me sell side analysis don’t change the estimates fast enough which is why the consensus numbers never change fast enough to predict a recession. It is not there fault because as long as you base most of your models on the company’s numbers and what they say in the management meetings you will always be surprised. When the company releases quarterly numbers and they don’t meet expectations.
    Buy side should be more accurate but their opinions aren’t usually public.

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