Market Getting it Right

I have been fairly bearish thinking the market is not pricing in correctly the coming and continuing economic slowdown and what that means to corporate profits. I will have to concede that for first quarter earnings the market does appear to have done a good job of pricing in earnings. You can see this from insight in Barrons column "The Trader."

http://online.barrons.com/article/SB120855843505127605.html?mod=9_0031_b_this_weeks_magazine_market_week

Consider the evidence: Out of almost 189 companies that reported earnings by Friday morning, 57% beat estimates, and these "have performed significantly better to the upside than stocks that missed have performed to the downside," says Bespoke Investment Group. In particular, companies beating targets have amassed average one-day gains of 4.11%, while those missing gave up just 2.86%. Even companies that merely met their marks have rallied 2.49% -- a sure sign investors were expecting worse.

In my mind this is significant and shows the market has priced in the problems so far fairly well. My argument continues to be the very anticipated second half economic recovery will end up becoming a mirage that will move to the first half of 2009 and probably to the second half of 2009. In the short term it looks like so far the market has got the earnings picture right.