Earnings season off to a good start. Third quarter earnings season is rolling and, so far, results have been quite good overall, supported by strong U.S. economic growth, robust U.S. manufacturing activity, tax cuts, and big increases in energy and financials sector profits. Below we recap the results of earnings season thus far, discuss why we expect strong results to continue throughout the reporting season, and highlight several keys we are watching.

Good Numbers so Far

We’re not even 20% through third quarter earnings results, but the numbers have been solid thus far despite pressure on profit margins from tariffs an

Investors’ first look at third-quarter gross domestic product (GDP) will be released on Friday, October 26.  Based on the economic data and projections we’ve seen, the economy grew at a moderate to strong pace in the third quarter, with the Bloomberg-surveyed economists’ consensus at 3.4%. The benefits of fiscal stimulus, continued consumer strength, and improved business spending have powered the U.S. economy this year, and we’ll likely see largely the same general story for the third quarter, although business spending may be somewhat less robust. Both trade and extreme weather in parts of the country are expect

We continue to favor the United States and emerging markets (EM) over developed foreign markets for global equity allocations. We see the U.S. economy as the primary driver of our forecast for 3.8% global gross domestic product (GDP) growth in 2018, supported by new fiscal policies, while Europe and Japan may lag.* The United States remains a global earnings standout as well. Despite underperformance this year, we continue to see upside potential in EM due to attractive valuations, recent economic growth, favorable demographics, and the potential for resolution to the U.S.-China trade dispute later this year [Figure 1].

Investors have been digesting a number of important global developments this year: fiscal stimulus, trade tensions, divergence in global policy and currencies, and political developments. As 2018 heads into the fourth quarter, we’ve put together what we believe these developments mean looking forward to 2019. Overall, we expect global growth to slow in 2019 but remain strong enough to continue to support the broad global economy and markets. The United States will continue to be the growth engine for developed markets, although we see some upside for Japan, but the front-loaded impact of fiscal stimulus is likely to fade somewhat. In th