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Fall 2019 Newsletter: Equities Lead the Expansion


The overall U.S. economic picture has supported continued expansion. Modest inflationary pressures helped boost demand and support corporate profit margins in the first quarter, and the Fed’s earlier decision to pause rate hikes boosted sentiment and increased demand for equities. Market technicals provided support for stocks’ rebound earlier this year, and historical patterns suggest the possibility for strength in 2019. We have slight preferences for:

  • Large cap over small cap
  • Value over growth
  • Emerging markets over developed markets

We continue to lean cyclically, favoring industrials, financials, and technology. We reduced our S&P 500 earnings per share (EPS) forecast to $170 for year-end 2019, mainly because of trade uncertainty, and our year-end S&P 500 fair value estimate remains at 3,000. We will revisit this forecast if clarity on trade and monetary policy result in an improved outlook for corporate profits.

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