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Wall Street History
https://www.gofundme.com/s3h2w8
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10/25/2002
Pre- vs. Actual
[We will return November 8.]
I’m currently out West, specifically in Laramie, Wyoming, doing
my rediscover America thing, so I don’t have access to my vast
Wall Street history library, but I did bring along my figures for
the S&P 500.
With the recent rally in the market off the Oct. 9 lows, much has
been written that this was, of course, expected because earnings
have been coming in better than anticipated. Folks have also
said that this shouldn’t come as a surprise. After all, Wall Street
always declines during the earnings “pre-announcement” period,
while it then advances during the actual announcement of earnings,
most of the bad news having already been released.
Well, I’m here to tell you, this isn’t necessarily so. I went back
11 quarters, all the way to the final bubble quarter of 2000, and
found that there is NO official pattern of behavior.
While this isn’t scientific, and no Wall Street firm or strategist
can do any better than I am about to, the fact is sometimes the
market goes up, sometimes it goes down. And boy, what a
surprise that is.
What I did is take the 3 weeks before earnings start coming
through (the best gauge of pre-announcements) each quarter and
measure this against the 3 key weeks of actual earnings
announcements. For example, looking at the second quarter of
2002, I examined the period 6/14-7/5 versus 7/5-7/26, which
covers the vast majority of S&P earnings.
The result? Assuming that this current earnings announcement
period for the third quarter stays positive, we have the following.
--For the pre-announcement period, the S&P 500 fell 8 out of 11
times. [An average of 3.3%.]
--For the announcement period, the S&P fell (again) 6 out of 11
times. [An average of 5.3%.]
In other words, again, those who say that, “Of course, stocks go
down during the pre-announcement period because it’s negative
news, but once earnings start in earnest, since it’s mostly good
news, stocks rise,” are full out of it!!! Case closed.
The market goes up because it wants to go up, or, vice versa, it
goes down because it wants to go down.
Sure, economic fundamentals are very important, as are
individual company earnings, but to base a theory on the “pre-“
versus “actual” is merely looking for trouble.
Now the numbers. All figures are for the S&P 500. The first
two are for the ‘pre-announcement’ period, the third number is
the end of the main ‘announcement’ period.
9/13/02 889.81
10/4/02 800.58
10/23/02 896.14 technically, another two days left.
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6/14/02 1007.27
7/5/02 989.07
7/26/02 852.84
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3/15/02 1166.16
4/5/02 1122.72
4/26/02 1076.32
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12/14/01 1123.09
1/4/02 1172.51
1/25/02 ..1133.28
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9/10/01 1092.54
10/5/01 1071.38
10/26/01 1104.61
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6/15/01 1214.36
7/6/01 ..1190.59
7/27/01 1205.82
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3/16/01 1150.53
4/6/01 .1128.43
4/27/01 1253.05
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12/15/00 1312.15
1/5/01 1298.35
1/26/01 ..1354.95
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9/15/00 1465.81
10/6/00 1408.99
10/27/00...1379.58
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6/16/00 1464.46
7/7/00 ..1478.90
7/28/00 1419.89
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3/17/00 1464.47
4/7/00 ..1516.35 [Includes all-time high of 1527 3/24]
4/2/00 ..1452.43
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The preceding data was culled from the editor’s personal files. It
is deemed to be correct, and I guarantee you won’t find this
anywhere else.
Due to travel, Wall Street History will return November 8.
Brian Trumbore
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