Upbeat as Expected

Companies remained generally upbeat during the third quarter earnings season, based on the LPL Research Corporate Beige Book Barometer. This is hardly surprising, given actual earnings results were good again and estimates of future earnings held up relatively well as companies provided forward-looking guidance.

Positive Sentiment Confirms Earnings Strength

Corporate sentiment remained very upbeat during the third quarter based on our count of positive and negative words in earnings conference call transcripts. We observed a pickup in strong words, little change in the number of weak words, and a resultin

Expect Flat to Low Returns

Given our outlook for the economy, Federal Reserve (Fed) policy, and the potential for fiscal stimulus, we expect the fixed income market to be under pressure in the coming year. Moderate gross domestic product (GDP) growth and rising inflation may lead to gradually higher interest rates, limiting bond returns. Investors in global fixed income markets can no longer count on central banks to support the asset class. That said, bonds remain an important element of a well-balanced portfolio, serving to provide protection should we experience equity market pullbacks.

Rising Interest Rates, a Fa

Double-Digit Returns?

Back to business: fundamentals to drive stock market gains in 2018. With a focus on business fundamentals and the impact of fiscal policy, the return of the business cycle means that earnings growth may have to shoulder most, if not all, of the load if stocks are going to produce attractive returns in 2018.

The good news is the S&P 500 Index may be well positioned to generate earnings growth at or near double-digits in 2018 thanks to a combination of better economic growth and potentially lower corporate tax rates, despite some possible downward pressure on profit margins from higher wages.

Expect Better Growth Worldwide

We look for the global economy to expand at a healthy rate of about 3.7% in 2018 thanks to an improved overall policy, economic, and investment environment across developed and emerging markets [Figure 1]. While accommodative monetary policies have been attributed to propelling both employment and consumption in developed markets, business investment lagged behind. But the length of the expansion should have forced many businesses to increase investment or risk losing market share. In developed markets, where monetary policy has a global impact, fiscal steps can now be taken to spur growth and exten