Clarity from the phase-one trade deal with China and United Kingdom election results could help shift stock market performance drivers more toward investing fundamentals in 2020. We expect stocks to appreciate in line with earnings growth next year, which justifies benchmark-like equity allocations in our view.

Clarity on Trade and Business Investment

In 2019, expanding valuations drove gains for stocks; in 2020, we expect earnings to do the heavy lifting. Better clarity on trade may help drive increased business spending and more productivity, which we think will lead to stronger earnings growth in 2020. We are encouraged b

U.S. stocks rose again this week, with the S&P 500 Index gaining for the 10th week out of 11 and setting more record highs. Trade talks with China continued to move forward, buoying sentiment; the “phase one” trade pact between the United States and China is expected to be signed in January. Stocks were unaffected by impeachment proceedings in the U.S. House in what was a fairly slow week for macro-market-moving news. Stocks also may have benefited from seasonal tailwinds.

Economic data mostly exceeded expectations and continued to reflect steady economic growth. Homebuilder sentiment from the National Association

U.S. leading indicators for November came in flat compared to October, ending a three-month streak of declining values. While investors cheered the end to the skid, the reading was below consensus expectations for a 0.1% increase.

The Conference Board’s Leading Economic Index (LEI), which we include as one of the “Five Forecasters” in our Recession Watch Dashboard, has yet to turn negative this cycle on a year-over-year basis. Investors pay special attention to the year-over-year change in the series, as a dip into negative territory has preceded all nine recessions since 1955.

As shown in the LPL C

The outlook has brightened for stocks in emerging markets. A key reason is the trade agreement the United States reached with China last week, even if it’s only phase one. We acknowledge tensions could escalate again as negotiations move to the next phase, but this is still a clear positive any way you slice it. The de-escalation in trade tensions can help support the economic growth outlooks for emerging-market countries, particularly China and its key Asia trading partners.

Another reason we believe the outlook is looking better is the recent under-the-radar increase in emerging-market earnings estimates. As shown in toda