• The prospect of slowing global economic growth, among other macro concerns, caused considerable volatility across stock, bond and commodity markets throughout Q4 2018.
  • This week saw some evidence of these concerns coming to fruition as the World Bank lowered its global growth forecast for 2019, from 2.9% to 2.8%, and U.S. growth forecast for 2020, from 2.0% to 1.7%.1
  • The Q4 earnings season again reminds investors how significantly macro-economic trends can impact financial markets.
  • As the chart shows, Q4 2018 earnings growth expectations for S&P 500 companies are expected to average approximately 16%.2 While this would represent a still-healthy double-digit growth rate for the quarter, it would be a nearly 10% decline versus the prior three quarters.
  • As economic growth moderates and investors digest the potential for additional downside earnings guidance, investors may be well served preparing for a more muted return environment in the coming quarters, coupled with periods of heightened volatility.

1 The World Bank, https://bit.ly/2shPqZS.
2 FactSet, as of January 7, 2019, https://bit.ly/2Fbfv5b.

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