Brian Belski, the Chief Investment Officer at Oppenheimer, is out with a somewhat bearish note this morning.
He’s not calling for a big selloff, but certainly he thinks the market won’t delight investors the way it has previously.
In a nutshell, expectations have gotten wildly bullish, in contravention of the real facts on the ground:
Although the S&P 500 has posted positive year to-date performance, we sense that more questions than answers remain at the forefront of most investors’ minds as they position their portfolios for the next several months and quarters. That being said, as the 1Q11 earnings season unfolds over the next few weeks, we expect volatility to continue to dominate the investing landscape as the market digests and at times reacts to daily data points—both good and bad. Nonetheless, one of our primary concerns regarding the earnings landscape for 2011 is that expectations have become overly optimistic given the economic and fundamental backdrop. For instance, recent estimate revisions have risen rather sharply (Chart 1) despite the fact that unemployment remains stubbornly high for this stage of the cycle, while guidance from corporate managements has become increasingly negative (Chart 2). Therefore, we believe that market earnings will ultimately surprise to the downside this year, which is the main reason we advocate a more active and disciplined investment approach for 2011.
The following charts show the problem. First, analyst revisions
And now, companies’ own revisions. As you can see, negative commentary is creeping up.