Evidence That Wall Street Analysts Really Hate Stocks Right Now

amsterdam stock exchange

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So stocks have been on a tear lately.  The S&P 500 is up a staggering 5.4% since the beginning of the year.Meanwhile, corporate earnings estimates have been slashed sharply and Q4 earnings season hasn’t been that great in terms of upside surprises.

So, what happens when stocks go up while earnings come down?

You get downgrades by Wall Street analysts.

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In fact, analysts all over the world have been downgrading stocks.  From Deutsche Bank’s Lars Slomka:

Global earnings 2012E have continued to see moderate downgrades of 1.3% over the last
month (mid December to mid January). These downgrades are primarily driven by Materials and Financials while the other eight MSCI sectors have all seen small downgrades of less than 1%. Downgrades in Europe and Japan have been slightly more pronounced over the last month while the US and Asia-ex-Japan have held up better. In Europe, the cyclical production sectors with a global focus like Autos, Chemicals and Industrial Goods & Services see downgrades continue to slow down.

The folks at Bespoke Investment Group put together this chart, which captures the number of daily net upgrades (upgrades less downgrades) on Wall Street.

As you can see, there hasn’t been a single day this year when upgrades outnumbered downgrades.


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