With stock markets trading near their record highs, it is becoming increasingly difficult for investors to find industry sectors that are capable of producing strong return on growth numbers. But the reality is that we may only be in the early stages of a sustainable long-term bull market that will be moving higher well beyond the end of the next year.
Most analyst reviews suggest a positive outlook for corporate earnings and this should help sports companies with needs for consumer viewership rising in 2018. At this stage, this is what most of the market is looking for as there are still real questions about how U.S. President Donald Trump’s tax reform plans will be accepted by the stock market and by the consumer majority. If these moves fail to translate into sustainable earnings growth for some of the most closely watched blue chip stocks.
In other words, there could be significant downside if investors use those events as a motivation to begin taking profits. So, until this happens, we will be taking a more moderate view of the market in terms of its likely returns for 2018.
Will we see a mirror performance of the amazing bullish activity that we have seen already in 2017? This may be unlikely. But, overall, we do not expect many changes in the broader trajectory of the S&P 500.
This will continue to be our baseline viewpoint until we start to see some major earnings disappointments across multiple sectors -- and the break of key support levels in the S&P 500 on its price charts. So far, this has simply not been the case as the market has made very consistent record rallies since the election results of last year.
Perhaps the leading indicator of whether or not these rallies are sustainable at the macro level will be the GDP figures themselves. If the pro-growth agendas are able to make it through the government, we could see annualized growth figures well above 4%.
This would bode very well for the labor market and for the economy as a whole. But it will also greatly benefit those that are already holding long positions in the S&P 500.
If you are not already holding exposure in these areas, it would be wise to view the S&P 500 as a buy on dips that may be seen in cases where declines are becoming more readily apparent. Until this is the case, we expect the rallies to continue well into next year.
