Reducing 2019 S&P 500 Earnings Forecasts

Last week stocks enjoyed their best week since November 2018, boosted by increasing hopes of Federal Reserve (Fed) rate cuts.

Unfortunately, stocks may not be in the clear yet, as trade tensions with China linger. “While the agreement with Mexico over the weekend to avoid tariffs is helpful, the odds of a prolonged trade war with China have increased in recent weeks,” noted LPL Chief Investment Strategist John Lynch.

Whether companies pay the tariffs or shift supply chains to other countries to avoid them, profitability will be impacted. Lynch added, “Due to tariffs and ongoing trade uncertainty, and the related drag on business confidence and economic growth, LPL Research has reduced its 2019 S&P 500 Index earnings forecast from $172.50 per share to $170.”

As shown in the LPL Chart of the Day, “Reducing 2019 S&P 500 Earnings Forecasts,” this forecast is still above consensus estimates ($168 per share according to FactSet) and represents growth. We see upside potential to this forecast depending on the path of negotiations with China.

We remain optimistic that the trade dispute can be resolved this summer, though probably not until more economic pain is inflicted on both economies. Despite the slight reduction in estimates, we stand by our year-end S&P 500 fair value target of 3,000.

For more details on our change in earnings forecasts, check out this week’s Weekly Market Commentary.

IMPORTANT DISCLOSURES

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.

All indexes are unmanaged and cannot be invested into directly. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment. All performance referenced is historical and is no guarantee of future results.

Investing involves risks including possible loss of principal. No investment strategy or risk management technique can guarantee return or eliminate risk in all market environments.

This Research material was prepared by LPL Financial, LLC.

Securities and advisory services offered through LPL Financial (LPL), a registered investment advisor and broker-dealer (member FINRA/SIPC).

Insurance products are offered through LPL or its licensed affiliates. To the extent you are receiving investment advice from a separately registered independent investment advisor, please note that LPL is not an affiliate of and makes no representation with respect to such entity.

If your advisor is located at a bank or credit union, please note that the bank/credit union is not registered as a broker-dealer or investment advisor. Registered representatives of LPL may also be employees of the bank/credit union. These products and services are being offered through LPL or its affiliates, which are separate entities from, and not affiliates of, the bank/credit union. Securities and insurance offered through LPL or its affiliates are:

Not FDIC or NCUA/NCUSIF Insured | No Bank or Credit Union Guarantee | May Lose Value | Not Guaranteed by Any Government Agency | Not a Bank/Credit Union Deposit

Member FINRA /SIPC

For Public Use | Tracking # 1-861706 (Exp. 06/21)