What have you always wondered about the economy? Tell us

Investors play the expectations game

Bob Moon Jul 8, 2009
HTML EMBED:
COPY

Investors play the expectations game

Bob Moon Jul 8, 2009
HTML EMBED:
COPY

TEXT OF STORY

Stacey Vanek-Smith: To everything there is a season, and today kicks off a new earnings season for U.S. companies. Alcoa will be the first company on the Dow index to report quarterly profits. Of course, most companies have been hammered by the recession. But for Wall Street investors, it’s not so much about the losses — it’s about how well companies can play the expectations game. Our senior business correspondent, Bob Moon, has more.


Bob Moon: For the most part, business executives have been offering a relatively bleak outlook, and that’s caused analysts to set their sights low. So even a slide in profits could be viewed as a positive sign — so long as the news isn’t awful.

Ted Weisberg is head of Seaport Securities. He says Wall Street hates nasty surprises, so the trick is managing expectations in the opposite direction:

Ted Weisberg: Where things are not as bad as anticipated. Now, whether or not everything is purposely being guided more negative than in fact it is, I guess we’ll never know the answer to that.

At Fort Pitt Capital Group, chief investment officer Charles Smith has his own set of expectations. He says corporate America has been focused on cutting costs, so it ought to have something to show for that:

Charles Smith: The bright side of 500,000 or 600,000 jobs lost every month is that earnings are going to be better than people expect.

That’s provided, of course, that the weeks ahead don’t end up living down to expectations.

I’m Bob Moon for Marketplace.

News and information you need, from a source you trust.

In a world where it’s easier to find disinformation than real information, trustworthy journalism is critical to our democracy and our everyday lives. And you rely on Marketplace to be that objective, credible source, each and every day.

This vital work isn’t possible without you. Marketplace is sustained by our community of Investors—listeners, readers, and donors like you who believe that a free press is essential – and worth supporting.

Stand up for independent news—become a Marketplace Investor today with a donation in any amount.