The proprietary expectation ratio continues to show signs of improvement. The indicator is the ratio of analyst expectations vs. actual corporate earnings. The important difference between this indicator and a typical earnings chart is that it includes the psychological side, i.e., the market’s expectations. Earnings are only a good indicator in terms of what the market expects. For instance, AAPL can report 30% year over year growth, but the numbers are only as good in terms of the markets expectations. If expectations are for 35% growth then the quarter is a disappointment.
The indicator continues to improve as more and more companies report during the quarter. I see this as a highly positive development. The indicator was early to turn negative in 2007 and will likely be early to turn in 2009.