Economic data has been under a microscope since the Federal Reserve (Fed) emphasized its allegiance to data dependency after raising interest rates in December. The Fed’s rate hike and Fed Chair Jerome Powell’s post-meeting press conference rhetoric spooked investors, who have been bombarded with negative headlines about trade, geopolitical squabbles, and a weakening global economy.

Last week’s economic headlines whipsawed investors looking for direction. Still, we see a common thread in the data: a solid economy struggling with the impact of trade tensions, but far from recessionary territory.

A Bl

While technically not a bear market, it sure felt like one. From its September 20 high through Christmas Eve, the S&P 500 Index fell 19.8%, including a more than 7% one-week (December 14–21) decline unmatched since the 2008–09 financial crisis. Should the S&P 500 end the month where it closed on Christmas Eve, December would mark the third-worst month ever for stocks, behind only October 1987 (-21.8%) and October 2008 (-16.9%).

Market participants have had a lot to digest, including the risk of a policy mistake by the Federal Reserve (Fed), the China trade dispute, a government shutdown, cabinet-level departur

Market participants’ evaluation of increasing policy uncertainty has contributed to sharp equity market declines over the last quarter. The list of issues raising concerns has been broad: the Federal Reserve (Fed); trade policy; looming Brexit deadlines; lack of a fiscal response to slowing growth abroad; worries about a slowing fiscal impact at home; tightening labor markets; partisan political bickering; a government shutdown; and executive branch turnover, to name a few. We don’t believe that any of these factors individually is currently a serious threat. Collectively, they have tipped market sentiment toward a brooding sense

After nearly 10 years of witnessing the U.S. economy and stock market recover and thrive, many investors are starting to wonder if we’ve seen all this expansion and bull market have to offer. LPL Research believes there’s more room to run, and we don’t expect an impending recession or bear market in 2019; however, it is a good time to start thinking about what the next phase for the economy and markets may look like.

Key Themes

Fiscal Policy

With the uncertainty of the midterm elections behind us and a split Congress convening in January, we expect “gridlock” to provide a better sense of polit