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Market Update: 01-22-18

FOURTH QUARTER EARNINGS SEASON OFF TO A GOOD START

John Lynch Chief Investment Strategist, LPL Financial | Jeffrey Buchbinder, CFA Equity Strategist, LPL Financial

It’s early in the season, but with about 50 companies having reported fourth quarter results, S&P 500 Index earnings are tracking a 12% yearover- year increase [Figure 1]. A solid 79% of the companies have bested earnings estimates, while 87% have topped revenue targets, both well above recent and long-term averages. In this week’s commentary, we preview fourth quarter earnings season and reiterate our optimism for corporate profits in 2018.

SIX REASONS FOR OPTIMISM

The S&P 500 has exceeded quarterly earnings expectations for 34 straight quarters and we see no reason why the fourth quarter of 2017 won’t make it 35. We believe an increase in the 14–16% range may be achievable, based on a 3–4% average upside to estimates historically. Though earnings growth may be driven mostly by technology and energy, growth is expected to be...

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