T. Rowe Price ‘ cau­tious’ on stocks in ’ 18

Chicago Sun-Times - - AMERICA’S MARKETS - Adam Shell

Cit­ing a big run- up in stock prices this year that has pushed up val­u­a­tions to el­e­vated lev­els, T. Rowe Price port­fo­lio man­ager Ann Hol­comb says she has a “cau­tious” view of U. S. stocks in 2018.

Speak­ing at the mu­tual fund com­pany’s 2018 Global Mar­ket Out­look press brief­ing Tues­day in New York City, Hol­comb says she ex­pects “lower eq­uity re­turns go­ing for­ward.” The broad U. S. mar­ket is up more than 15% this year.

But she’s not low­er­ing re­turn ex­pec­ta­tions be­cause she sees busi­ness con­di­tions wors­en­ing. Rather, she still ex­pects cor­po­rate earn­ings growth to con­tinue in the newyear and doesn’t ex­pect mod­er­ate in­ter­est rate in­creases from the Fed­eral Re­serve to im­pede the per­for­mance of stocks. The prob­lem, how­ever, is that an­a­lyst profit es­ti­mates are high, which means “up­side sur­prises” in earn­ings will be harder to achieve.

Cur­rently, there are “no sig­nif­i­cant cat­a­lysts in sight to war­rant a risk- off stance,” she says. And U. S. stocks, es­pe­cially smaller com­pa­nies with do­mes­tic- fo­cused busi­nesses, could get a boost if Congress is able to make good on its tax re­form prom­ises and lower the tax rates on in­di­vid­u­als and busi­nesses.

Hol­comb says the best re­turns could come from the tech­nol­ogy and health care sec­tors. In gen­eral, for stocks to do bet­ter com­pa­nies will need to con­tinue boost­ing their rev­enue and law­mak­ers in Wash­ing­ton, D. C. will have to get some growth­friendly poli­cies en­acted.

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