By Maurice Stouse
Raymond James has come out with its Investment Strategy Quarterly, which is full of market updates and investment guidance. In it is what analysts with the firm see as headwinds facing the market, but also tailwinds that could further lift the market. It is a great piece for investors and for people wanting to contemplate their portfolio and planning for their goals.
After a 15 percent rise following the Trump election, where might the market be heading next? The tailwinds are tax reform (that would include individuals as well as companies), the growth in earning of companies here in the US and abroad, and the fact that interest rates – despite recent moves – remain favorable for expansion or growth.
On the other side would be what Raymond James analysts noted as headwinds. Those include political uncertainty, the strength of the US dollar (which make US goods and services more costly abroad), and protectionism.
The analysts see the growth in earnings (of the S&P index) in 2017 to be an increase of 8% from 2016. And that could further be boosted by tax reform. Tax reform could bring about simplicity, the potential repatriation of dollars, and lower rates for US companies. This could potentially increase investment spending. The firm takes note, as one example, that cutting the US corporate tax rate to 20% could boost the earnings of the S&P 500 an additional 6-7%. Looking to 2018, the consensus estimate is for growth of 11.5%. These are all favorable to stocks. What then, would be unfavorable?
Reviewing the unknowns, it first turns to uncertainty. Will there be health care reform and tax reform? Might there be legislation that would boost infrastructure spending? What will the federal reserve do with respect to interest rates? What about inflation? Of significance would be consumer spending, which makes up almost 70% of the US economy. The two fundamental drivers of that are job growth and wage growth. Job growth has been steady (and the unemployment rate reflects that), but what is less certain is the growth in wages. And finally, trade policy. It remains a risk because it too is an unknown.
As the US (and the world economy) shifts and grows, there are other things of which to take note. Elections in Europe and the effects of Brexit are two in particular. And there is also what the firm notes as China’s economic transition. Regardless, the global outlook is seen as brighter.
For greater detail and insight, contact your Raymond James advisor for your own copy of Investment Strategy Quarterly.
Maurice Stouse is a Financial Advisor with Raymond James and resides in Grayton Beach. His office is located at Raymond & Associates, Inc., 34851 Emerald Coast Parkway, Suite 200, Destin, FL 32451. Raymond James & Associates, member New York Stock Exchange/SIPC. Phone 850.460.1995. Email: Maurice.stouse@raymondjames.com.
Views expressed are the current opinion of the author and are subject to change without notice. Information provided is general in nature, is not a complete statement of all information necessary for making an investment decision, and is not a recommendation or a solicitation to buy or sell any security. Past performance is not indicative of future results. There is no assurance these trends will continue or that forecasts will occur. Investing always involves risks, and you may incur a profit or a loss. No investment strategy can guarantee success.
Views: 0