Corporate earnings in the first quarter of this year were terrible; unimaginably bad compared to most forecasts only a few months before the quarter began.

But they were also a pleasant surprise, and that let stock markets rally. In the long run, earnings are central to stock prices and valuations – it is the right to a share of the long-term earnings stream that you buy when you buy a share. In the short-term, the last months show us, it is earnings forecasts that drive markets.