The strengh of U.S. equity markets these past few weeks has prompted questions regarding whether or not our outook has changed. It has not. The following is the 2012 Outlook from late 2011. Please feel free to call with questions.
Meeting in the Middle
Over the last four years, the market declined in excess of 2% in a single day around 100 times, more than any other four-year period since the S&P 500 Index’s formation in 1957. On the flipside, the market also recorded a 2% or greater gain in a single day more than any other four-year period. While the last few years have been highlighted with record swings in market returns and widely oscillating data, we expect 2012 will be less about the fringes and more about the middle.
While moving away from the drastic extremes will be a welcome environment for whipsawed investors, the center offers its own distinct challenges and opportunities. In 2012, finding a middle ground, or Meeting in the Middle, is going to be key for growth in the markets and economy. We believe that:
We expect the U.S. economy to grow about 2%, while emerging markets post stronger growth and Europe experiences a mild recession. U.S. gross domestic product is likely to be supported by solid business spending and modest, but stable, consumer spending.
The U.S. stock market is likely to post a high single-digit to low double-digit gain, supported by earnings growth and a boost from a slight improvement in valuations.
While volatility is likely to remain elevated, the market and its economic backdrop may begin to migrate from the extremes toward a more normalized period where investor sentiment, economic activity and the market’s direction start to move increasingly in alignment.
Until next week,
Susan R. Linkous
This research material has been prepared by LPL Financial. The opinions voiced are for general information only and not intended as specific advice. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly. Thank you.
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