Navigating the Markets
Compass Changes
- No changes.
Takeaways
- We continue to favor U.S. stocks based on our just released Outlook 2015: In Transit, where we forecast high-single-digit S&P 500 returns in 2015, supported by estimated 5-10% earnings growth and stable price-to-earnings (PE) ratio.*
- We favor U.S. stocks over their foreign counterparts due primarily to lackluster growth and structural impediments in Europe. Emerging markets are a top idea for 2015, but technicals hold us back in the near term.
- We continue to favor cyclical growth sectors, which tend to do well during the middle to late stages of the business cycle. Energy is an intriguing contrarian opportunity but caution is warranted.
- The decline in oil prices suggests a later start to Federal Reserve (Fed) rate hikes and may continue to support bonds over the near term.
- High-yield bonds continue to struggle amid the energy sector headwind and heavy new issuance. Longer-term, strong earnings, low defaults, and now more attractive valuations should help support the sector.
- From a technical perspective, the S&P 500 remains above its 200-day simple moving average and near all-time highs, which suggests the long-term trend remains bullish.
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*Historically since WWII, the average annual gain on stocks has been
7-9%. Thus, our forecast is in-line with average stock market growth.
We forecast a 5-9% gain, including dividends, for U.S. stocks in 2015
as measured by the S&P 500. This gain is derived from earnings per
share (EPS) for S&P 500 companies growing 5-10%. Earnings gains are
supported by our expectation of improved global economic growth and
stable profit margins in 2015.
IMPORTANT DISCLOSURES
Simple moving average is a simple, or arithmetic, moving average that is calculated by adding the closing price of the security for a number of time periods and then dividing this total by the number of time periods.
The opinions voiced in this material are for general information only and are not intended to provide or be construed as providing specific investment advice or recommendations for any individual. To determine which investments may be appropriate for you, consult your financial advisor prior to investing. All performance referenced is historical and is no guarantee of future results. All indexes are unmanaged and cannot be invested into directly.
Past performance is no guarantee of future results.
Stock investing involves risk including loss of principal.
Preferred stock investing involves risk, which may include loss of principal.
The Standard & Poor’s 500 Index is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.
This research material has been prepared by LPL Financial.
To the extent you are receiving investment advice from a separately registered independent investment advisor, please note that LPL Financial is not an affiliate of and makes no representation with respect to such entity.
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