They're here: the barrage of year-end investment stories that financial magazines run every December.
They generally offer outlooks for virtually every investment under the sun, including stocks.
These investment outlooks are usually based on fundamentals. A bullish outlook on stocks, for example, is sure to quote investment professionals who cite earnings or expected earnings.
Like this from a well known personal finance magazine (11/4):
"As some of the uncertainties surrounding the economy lift over the course of the year, attention is bound to turn back to the fundamentals of the private sector, says [a] chief investment officer...
"And on that front, things don't look so bad. Corporate profits are hanging tough. Yes, growth has been slowing noticeably in recent months, but earnings for firms in the S&P 500 (SPX) are still expected to climb an above-average 9% next year, according to S&P Capital IQ."
In the February 2010 Elliott Wave Theorist, Robert Prechter spoke head-on to the notion that "Earnings drive stock prices":
"This belief powers the bulk of the research on Wall Street. Countless analysts try to forecast corporate earnings so they can forecast stock prices. The exogenous-cause basis for this research is quite clear: Corporate earnings are the basis of the growth and the contraction of companies and dividends. Rising earnings indicate growing companies and imply rising dividends, and falling earnings suggest the opposite. Corporate growth rates and changes in dividend payout are the reasons investors buy and sell stocks. Therefore, if you can forecast earnings, you can forecast stock prices.
Suppose you were to be guaranteed that corporate earnings would rise strongly for the next six quarters straight. Reports of such improvement would constitute one powerful 'information flow.' So, should you buy stocks?" [See the chart below]
Prechter's commentary continued:
"[The above chart] shows that in 1973-1974, earnings per share for S&P 500 companies soared for six quarters in a row, during which time the S&P suffered its largest decline since 1937-1942. This is not a small departure from the expected relationship; it is a history-making departure. Earnings soared, and stocks had their largest collapse for the entire period from 1938 through 2007, a 70-year span! Moreover, the S&P bottomed in early October 1974, and earnings per share then turned down for twelve straight months, just as the S&P turned up! An investor with foreknowledge of these earnings trends would have made two perfectly incorrect decisions, buying near the top of the market and selling at the bottom.
"In real life, no one knows what earnings will do, so no one would have made such bad decisions on the basis of foreknowledge. Unfortunately, the basis that investors did use—and which is still popular today—is worse: They buy and sell based on estimated earnings, which incorporate analysts’ emotional biases, which are usually wrongly timed."
I think you can infer our opinion on whether most "year end outlooks" are worth a tinker's dam.
We do believe our latest analysis of financial markets is well worth a risk-free review. You'll gain a perspective on stocks, bonds, gold, silver, the U.S. dollar, the euro, the economy, and more which you will not find anywhere else.