Even If The Economy Doesn't Double-Dip, 2011 Earnings Forecasts Look Too High

Here’s some nice perspective on where the market stands, earnings-wise.

Earnings estimates for 2010 have been rising pretty much all year, which is has been good news. Problem is, the expected earnings growth for 2011 seems to leave much room for disappointment, at least when it comes to the Dow Jones Industrial Average as shown below.

Even if the economy doesn’t double-dip (which it most likely won’t) and the U.S. economy ekes out some low-single-digit GDP growth in 2010, will it be enough to increase profits by 12.2% year over year? Maybe the market isn’t pricing in 12.2% growth, since despite the forecasts most people are sceptical, but we’d be far more comfortable if 2011 estimates were lower. Then there would be less room to disappoint.

(Chart via John Tobey)

Chart

NOW WATCH: Money & Markets videos

Want to read a more in-depth view on the trends influencing Australian business and the global economy? BI / Research is designed to help executives and industry leaders understand the major challenges and opportunities for industry, technology, strategy and the economy in the future. Sign up for free at research.businessinsider.com.au.