Growth
We continue to expect a modest pickup in economic growth in 2017 to near 2.5%, based on gross domestic product (GDP), supported by improving business investment, steady consumer spending gains, and, later in the year, pro-growth fiscal policy.
Earnings
We expect high-single-digit S&P 500 earnings growth* in 2017 to potentially drive further, though modest, gains for stocks overall this year. Earnings growth may be supported by better U.S. economic growth, rebounding energy sector profits, a stable U.S. dollar, and resilient profit margins.
*We expect mid-single-digit returns for the S&P 500 in 2017 consistent with historical mid-to-late economic cycle performance. We expect S&P 500 gains to be driven by: 1) a pickup in U.S. economic growth particularly due to fiscal stimulus; 2) mid-to-high-single-digit earnings gains as corporate America emerges from its year-long earnings recession; and 3) an expansion in bank lending; and 4) a stable price-to-earnings ratio of 18-19. Source: LPL Financial.
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