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A key to success, in life and investing, is juggling the familiarity and wisdom of old routines with the adjustments demanded by an ever-evolving world. As we look forward to 2016, the LPL Research team expects a return to routine for some key areas of the economy and market, but by a path that may catch some investors unprepared. Investors will need a solid plan to navigate the changing landscape as they adjust to changes like the start of Federal Reserve (Fed) rate hikes, a maturing economic cycle, and the 2016 elections. As a guide to revitalizing routines for 2016, we are excited to introduce the LPL Research Outlook 2016: Embrace the Routine, with financial market forecasts, economic insights, and investment guidance for the year ahead. Some of the expectations for 2016 include:
We believe LPL Research's Outlook 2016 will help investors refresh, renew, and embrace their routines in the face of unexpected developments and a changing environment. By embracing new routines, investors will be able to focus on what matters most to markets, block out short-term distractions that will quickly fade, and seek to make progress toward long-term financial goals.
As always, if you have questions, I encourage you to contact me.
 Our forecast for GDP growth of between 2.5–3% is based on the historical mid-cycle growth rate of the last 50 years. Economic growth is affected by changes to inputs such as: business and consumer spending, housing, net exports, capital investments, and government spending.
 Historically since WWII, the average annual gain on stocks has been 7–9%. Thus, our forecast is in-line with average stock market growth. We forecast a mid-single-digit gain, including dividends, for U.S. stocks in 2016 as measured by the S&P 500. This gain is derived from earnings per share (EPS) for S&P 500 companies assuming mid- to high-single-digit earnings gains, and a largely stable price-to-earnings ratio (PE). Earnings gains are supported by our expectation of improved global economic growth and stable profit margins in 2016.
The economic forecasts set forth in the presentation may not develop as predicted and there can be no guarantee that strategies promoted will be successful. Stock and bond strategies involve risks including the loss of principal. Alternative investment strategies carry a higher degree of risk.