The volatility throughout the fourth quarter and December was enough to rattle the nerves of most investors. And a large sell-off right at the start of 2019 spooked investors further, at least before the Dow Jones industrial average posted a multiday recovery that took the index up about 1,250 points from its lows. While investors might have blamed machine trading and algorithms for the selling pressure in December, this was during a period when most people didn’t want to buy stocks. And it was a time when economic numbers and corporate news were looking less and less grand each week.
Now the investing community is preparing for waves of corporate earnings reports for the fourth quarter of 2018. Some companies are likely to post stellar earnings compared with the December quarter estimates, but where things are looking rather shaky is what to expect for guidance for the first quarter and for all of 2019. It is this guidance that should be of concern here, because at the current time most international corporations have every single reason to be cautious and conservative. They have no idea if trade talks will really result in a grand bargain with China, no idea if the partial government shutdown will get resolved, no clue if Federal Reserve Chair Powell really will slow down on the rate hike game, and no idea if the economic picture will improve.
24/7 Wall St. has warned that the analyst community had not dialed down expectations enough for the current climate. This also means that the investing community was not dialed in enough with reality, even after the major volatility made for the worst December since the Great Depression of the 1930s. At the start of 2019, the model we use for tracking analyst forecasts was pointing to Dow