The U.S. stock market’s return during the first month of a quarter correlates strongly with returns in future months, but the correlation is negative if the future month is the first month of a quarter, and positive if it is not. These effects offset, leaving the market return with its weak unconditional predictive ability known to the literature. The pattern accords with a model in which investors extrapolate announced earnings to predict future earnings, not recognizing that earnings in the first month of a quarter are inherently less predictable than in other months. Survey data support this model, as does out-of-sample return predictability across industries and international markets. These results challenge the Efficient Market Hypothesis and advance a novel mechanism of expectation formation.