After a week packed with major events in the market, we can now assess which predictions were off the rail. Some analyst predictions were inaccurate in some aspects while others failed miserably.
This week, in the financial markets, was probably one of the busiest with many major companies releasing their first quarter earnings reports. At start of this week, analysts were at it again, doing what they do best. Some of their predictions turned out to be correct whereas others were flatly inaccurate.
To start, the strong earnings reports from Goldman Sachs Group Inc. (GS, +0.75%) and J.P. Morgan Chase & Co. (JPM, +1.01%) sent stocks soaring on Wall Street. Goldman reported a rise of 40 percent for the 1st quarter compared to the same period a year ago. Meanwhile, J.P. Morgan also reported a 12 percent increase which prompted analysts to predict that the declines as a result of the financial crisis were finally recovering.
While the first quarter earnings were positive for two of the big financial firms on Wall Street, it is important to remember that a 3 month report is not a clear trend indication. In fact, a report issued by SNL Financial on Friday, brought analysts down back to reality. First of all, since the financial crisis, industry revenue from trading has decline by a third. Added to this, the positive results from J.P. Morgan were boosted by other external factors such as e Swiss franc (CHF) decoupling from the euro, while other factors such as declining all prices and a strong U.S. dollar (USD) also had an impact on earnings reports.
While all the focus was on the positive earnings reports by Goldman and J.P. Morgan, another reality is that other companies in the sector didn’t fare as well. For example, the Bank of America Corp. (BAC, +1.55%) reported a decline in trading revenue of 7 percent while the trading revenue of Citigroup Inc. (C, +1.18%) dropped 9.5%.