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The 2018 Stock Market Final Four

LPL Financial

The NCAA Basketball Tournament isn’t the only one with a “Final Four.” LPL Research has released its version as well, noting four factors that may affect the stock market in 2018.

LPL Research Releases Its Stocks 2018 Final Four Factors

In the spirit of March Madness and the 2018 Final Four national semifinals, LPL Research has identified its “Final Four Factors” for the stock market in 2018. If you missed the team’s Sweet 16 picks, you can read about them here.

You won’t see any references to Kansas, Loyola, Michigan, and Villanova, the teams appearing in the Final Four matchup. What you will find, however, are insights regarding economic growth, earnings, trade policy, and the midterm elections.

LPL Research believes there will be a hard-fought battle between these factors. Along with it may be more market volatility. Yet, the team also believes we’ll still see the potential for solids gains for stocks this year and maintain our year-end fair value S&P 500 Index target 2950-3000.

Final Four Stock Market Factors Highlights

Economic growth, earnings, trade policy, and the midterm elections may all have an impact on the stock market for the remainder of 2018. According to the LPL Research team:

  • We expect 2.75–3.0% GDP growth in the United States in 2018, which could help drive strong corporate profit growth and potentially double-digit stock market gains this year.*
  • There may be mid-teens earnings gains for the S&P 500 in 2018. Protectionist trade policies have the potential to be a drag on corporate profitability later this year. However, the LPL Research team anticipates that the earnings impact from trade actions out of Washington will be manageable.
  • The potential for a wider trade conflict that impairs economic activity could continue to weigh on investor sentiment in the coming months. The team expects limited overall economic impact and manageable disruption to corporate America.
  • Stocks may see increased volatility around policy uncertainty during an election year. However, market fundamentals remain healthy, and we are encouraged by the historical pattern of stocks bouncing back strongly from midterm election year weakness.  

 

To get the full story, download Stocks 2018 Final Four Factors.

 

*We believe 2018 earnings will be supported by stronger global economic growth, a pickup in business spending, strong manufacturing activity in the United States, and the new tax law. Our year-end S&P 500 fair value target range is 2950–3000 based on a price-to-earnings ratio (PE) of 19.5. We also project real gross domestic product (GDP) growth of around 3% in 2018. This is in line with historical mid-cycle growth of the last 50 years. Economic growth is affected by changes to inputs such as business and consumer spending, housing, net exports, capital investments, and government spending.