Great expectations - raising the bar

Markets are a race between fundamentals and expectations. When fundamentals get ahead, expectations have to catch up and prices follow. But when expectations get ahead, it's a different story. Fundamentals can't just run faster or jump higher. So it's expectations that need to take a knock, dragging share prices down with them. Rob Perrone from our offshore partner, Orbis, explains this relationship in this 7-minute video.

Now, my absolute favourite way of thinking about the relationship between fundamentals and expectations is the high jump. When a company's sales, profits and growth clear the bar easily, the bar goes up and so do prices. But when the bar is too high, fundamentals crash into expectations, knocking down both estimates and share prices. We see this all the time.

Take Nvidia's recent history.

It's May 2023, and the company is about to report earnings for the first full quarter since the launch of ChatGPT. Markets didn't expect much, and the company soared over the bar, beating sales estimates by 10%. Those estimates had to rise, and over the next week, the shares were up 28%.

Read full article: https://www.allangray.co.za/latest-insights/offshore-investing/great-expectations---raising-the-bar/

September 22 2025 By Rob Perrone - Allan Gray