5 Things to Watch in the U.S. Equity Markets in 2018

By Chaikin Analytics via Iris.xyz

1. The bull market is maturing, but is not over yet

The adage that “bull markets climb a wall of worry” held true in 2017, as political strife in Washington crescendoed to a level not seen before, geopolitical factors worsened, and the rally to new highs brought out the bears in the media.

Ultimately, fundamentals drive stock prices and with the U.S. economy on solid footing, coupled with ongoing growth in both top-line revenues and bottom line earnings, fundamentals are supportive of continued upside for equities.

History indicates bear markets rarely materialized, while the economy was expanding. We believe it is unlikely this time will be different. Amid lower corporate taxes and easing regulatory burdens, the earnings picture continues to look good for U.S. stocks, which we believe will be a continued tailwind for higher stock prices.

The S&P 500 is on a torrid pace. The last time the U.S. equity gauge benchmark declined on a monthly basis was November 2016, and the last 5% decline was back in June 2016, during the Brexit imbroglio. This year, we believe there are likely to be one or two declines of 5% to 10%, but in the context of a positive year, those declines will be buying opportunities.

Overall, 2018 should be a continuation of the earnings-driven upside delivered in 2017, supported by expanding top- and bottom-line numbers.

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