2017 Midyear Outlook

Thus far in 2017, an important shift has taken place in this economic cycle. The Federal Reserve has shown increasing trust that the economy has recovered and that market forces can keep it steady. Fiscal policy may now provide the backstop to the economy that monetary policy has provided throughout the expansion. The gauges say growth engines and market drivers may have changed: power down monetary policy, power up business fundamentals, and potentially take fiscal policy and economic growth off standby.

Here are the key themes LPL Research will be watching as we look ahead to the rest of 2017:

• Monetary policy: Slow path to normalization. Maintaining economic growth without extraordinary central bank support will be key.
• Business fundamentals: Now taking control. A focus on well-run businesses with the potential for earnings gains may favor active management.
• Economic growth: Confidence not enough, yet. Business and consumer confidence has improved, but greater policy clarity may be needed to spur growth.
• Fiscal policy: Pro-growth potential, but when? Fiscal policy support remains likely, but the timetable may be pushed back to 2018.

View the complete Midyear Outlook: A Shift in Market Control, featuring forecasts for stocks, bonds, and the economy, as your guide for the remainder of the year.