Here at LPL Research, we continue to favor the United States and emerging markets (EM) over developed foreign markets for global equity allocations. We see the U.S. economy as the primary driver of our 3.8% global gross domestic product growth forecast in 2018, supported by new fiscal policies, while Europe and Japan may lag.* The United States remains a global earnings standout as well.
As our LPL Chart of the Day shows, despite 2018 underperformance, we continue to see upside potential in EM due to attractive valuations, recent economic growth, favorable demographics, and the potential for a resolution to the U.S.-China trade dispute before year-end.
“U.S. economic and earnings growth continue to stand out globally, while we continue to see solid upside potential in EM,” said LPL Research Chief Investment Strategist John Lynch. “Slowing economic growth and structural concerns in Europe lead us to remain cautious tactically on developed international equities.”
For more on our global equity market outlook, please see this week’s Weekly Market Commentary.
*For more on our 2018 forecasts, please see the Midyear Outlook 2018: The Plot Thickens.
Investing in foreign and emerging markets securities involves special additional risks. These risks include, but are not limited to, currency risk, geopolitical risk, and risk associated with varying accounting standards. Investing in emerging markets may accentuate these risks.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual security. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. The economic forecasts set forth in this material may not develop as predicted.
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