Wall Street Analysts Have Been Starting New Years Too Optimistically For Decades

Specifically, they tend to come into new years more optimistic about company earnings than they are 12 months later.

This has been the trend for decades.

"Over the past 39 years, the bottom-up earnings estimates for the US market have been too high 32 times, meaning that the analysts are typically too optimistic," Morgan Stanley's Adam Parker wrote in a new note to clients. 

"In fact, analysts' estimates typically gross up to a 14% expectation for growth in a given January, only to decline through the year to 6% on average by year end."

The good news is that the stock market has trended higher since 1976 when this chart begins.

Morgan Stanley is bullish like most of Wall Street in forecasting that the S&P 500 will end 2015 at 2275, with EPS earnings growth of 7%.

But what's far more trickier to forecast is the earnings multiple. Parker is forecasting that the market multiple will grow to 16.7x, but also warns "we don't think anyone (including us) can provide empirical evidence with statistical significance to forecast the price-to-earnings ratio of the S&P 500 in a 12-month or shorter time frame."

So you can't attach that much importance to downward revisions to earnings forecasts, he wrote.