Is The Market Still Rational in Turbulent Times?

Is the market still rational in turbulent times? Earnings revisions over the past months suggest it is – and strongly.

As the market noise starts to settle, analysts have been revising their earnings expectations for S&P 500 companies - and the shifts over the past months reveal a classic pattern.

🔹 Defensive sectors like Utilities, Food &Drug Retail, and Commercial Services are holding steady.

🔻 Banks, Autos, and Semiconductors are facing sharp downward revisions.

In the visual below:

  • Companies are ordered from let to right based on the magnitude of earnings revisions over the past month (from negative to positive),

  • From top to bottom by market risk low to high, based on beta, volatility, and skewness,

  • Colored from red to green according to their relative performance against the S&P 500 over the same period.

Despite waves of conflicting economic and geopolitical headlines, markets are reacting in a very textbook way - favoring low-risk, defensive stocks during periods of uncertainty.

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