Nortel recently warned that growth might not return until 2002. Late last week, storage software maker EMC lowered expectations of 2001 growth, sending its stock into a tailspin. A recent analysis by Sanford C. Bernstein analyst Tom Wolzien strongly suggests that economists, by and large, are actually guessing about the year-end results. He noted that each month, as the economy got worse, economists stubbornly stuck by their predictions of GDP growth of somewhere around 5.5 percent. Every month it gets more amazing - their results at the end are just the same as the beginning.
Research analysts covering individual stocks seem to have no more clue than economists.
Typically, analysts covering a given company agree on earnings and even revenue projections. When they disagree, it tends to be within a few percentage points. Analyst consensus seems to be eroding as the economy slows. It's clear the analyst community, by and large, has no idea what to expect this year. We should be able to improve, like any science, over time.