It is not surprising company earnings revisions have been mostly downside revisions with most of the country/consumers sitting at home. What is noteworthy though is the upside to downside earnings revision ratio tends to bottom near equity market bottoms. During the 2008/2009 financial crisis, the revision ratio bottomed in late February and the S&P 500 Index bottomed a little over two months later. As the below chart shows, the current upside/downside ratio is lower than the ratio reached at the bottom of the financial crisis in 2008/2009.
Analyst earnings estimates have seen a reset as well with 2020 I/B/E/S forecast earnings now below $140 for the S&P 500 Index.
If the country can get opened by mid-May, further economic damage has a chance of being minimized. With the lowered expectations, not only with earnings but with the economic data as well, the comparison become easier to beat. In this type of environment the magnitude of the second derivative or rate of change becomes more significant due to the lower comparison level and this can serve as a catalyst for higher stock prices. There are no guarantees in life and this can take several months to play out. In the interim though, the market may experience more volatility, but continue to price in some of this positive data. A key, in my view, is getting consumer/business activity back up and running soon.
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