Leading retail investment advisory firm and independent broker/dealer LPL Financial LLC, a wholly owned subsidiary of LPL Financial Holdings Inc., today announced its annual research publication, Outlook 2019: FUNDAMENTAL: How to Focus on What Really Matters in the Markets, is available for download. The report contains investment insights and market guidance covering 2019.
LPL Financial Research believes the following three themes will be key to the markets in 2019.
- Sustaining growth via fiscal policy. LPL Financial Research believes the ongoing impact of fiscal stimulus will be readily apparent in 2019 and that policy will continue to play an important role for the economy and financial markets—potentially extending the duration of this business cycle.
- Creating opportunity amid rising volatility. LPL Financial Research believes any bouts of market volatility can be embraced—not feared—by suitable investors as an opportunity to rebalance portfolios toward targeted allocations.
- Fundamentals in focus. LPL Financial Research believes this economic and market cycle has more room to run given the team’s conviction in the fundamentals supporting economic growth and strong corporate profits. Depending on the measures, LPL Financial Research believes this cycle may prove to be the longest in history. Risks such as trade uncertainty, slowing global growth or geopolitics do require careful monitoring, however, for their potential impact on the markets and economy.
Against this backdrop, the LPL Financial Research report forecasts the following:
- Economy: GDP growth up to 2.75 percent. LPL Financial Research believes expectations should be lowered in 2019 and forecasts U.S. gross domestic product (GDP) growth of 2.5 to 2.75 percent in 2019, supported by consumer spending, business investment and government spending.
- Stocks: Total return possibility in the range of 8 to 10 percent when including dividends, as measured by the S&P 500 Index, driven by potential earnings per share gains in the range of 6 to 7 percent. Based on expectations for economic growth and monetary policy, along with the fiscal tailwinds of government spending, reduced regulation and lower taxes, LPL Financial Research expects 2019 may be a good year for equity investors. Accordingly, LPL Financial Research forecasts slightly above-average returns for the S&P 500 Index for 2019.
- Bonds: Flat returns. With market interest rates climbing from historic lows, bond investors must be prepared for gradually rising rates, with periodic surges that may temporarily affect sentiment. As a result, LPL Financial Research expects flat returns for bonds in 2019, as measured by the Bloomberg Barclays Aggregate Index.
“We do not anticipate a recession in 2019, thanks to the fundamentally driven economic momentum, combined with fiscal incentives and government spending programs on tap for the coming year,” said LPL Financial Executive Vice President and Chief Investment Strategist John Lynch. “We encourage investors, where appropriate, to base any investment decisions on the fundamentals rather than acting on speculative headlines, especially as the cycle matures and the 2020 presidential election now comes into increased focus.”