The investing public tends to place a great deal of faith in the forecasts of economists. To be frank, I am not entirely sure why. An overwhelming majority missed the impact that well-documented declines in real estate were having on the economy in 2007.
Here in 2014, the latest housing data may be showing cracks as well. For example, the National Association of Home Builders (NAHB) puts out a monthly housing market index. In February, the index plummeted to 46, then experienced an underwhelming rebound to 47 in March. Members lack enthusiasm for building conditions whenever the index is below 50. Many economists have dismissed the sour sentiment on the basis of extremely poor weather. However, these are builder expectations about future sales. Wouldn't shifts in the moods of executives be tied more to people's desire and ability to purchase properties than to seasonal affective disorder?
Data on the actual
Stock prices are primarily driven by the expectations that investors have for the amount of money they can reasonably expect to earn through the shares of businesses that they own. Specifically, businesses that have raised money in the past to fund their growth by selling off portions of the ownership of the business to investors in return for a share of the profits that they expect to sustain in the future.
The sustainable portion of a business' profits that investors can reasonably expect to earn through their ownership of the share of the business are called dividends, where the business' primary owners periodically divide up a portion of the profits earned by the business and pay them to out to investors in direct proportion to their share of ownership in the business.
Consequently, what investors expect to earn through dividends at the specific times in the future at which they