March 20, 2018

So, the first weekend of the 2018 NCAA tournament is in the books. It more than lived up to the “March Madness” moniker, with massive upsets, buzzer-beaters and one result that will forever be remembered in the annals of the event’s history. For one weekend in March, the tiny commuter school from Baltimore known for its academics and championship-winning chess team captured the hearts of the college basketball world and beyond. UMBC became the first No. 16 seed to knock off a No. 1 in the NCAA Tournament, a victory over Virginia that made the Retrievers the ultimate Cinderella.

In the spirit of March Madness, we have compiled our “Sweet 16” for the stock market, complete with some top seeds and potential bracket busters. We identified 16 keys for stocks for the remainder of the year and assessed their potential market implications.

One of the top seeds is U.S. gross domestic product (GDP) growth, which we expect to accelerate from 2.3% in 2017 to 2.75–3.0% in 2018; this includes a 0.25–0.5% boost from the new tax law. With economic growth improving, manufacturing humming, and analysts’ estimates soaring, we expect earnings gains in the mid-teens for the S&P 500 Index in 2018.  Trade policy is the one potential bracket buster on the list that could pull off an upset. Though the recently announced steel and aluminum tariffs may have limited economic impact, tensions could escalate into a trade war with China.

Next week we reveal our “Final Four” where we will take a deeper dive into some of these market drivers. As always if you have any questions or concerns, I encourage you to contact me.