2012 Market Outlook. This report  reveals LPL’s opinion of what investors can expect in the coming year and suggests how to best position a portfolio to seek profit from the opportunities and protect from the risks. In summary, LPL’s Market Strategists’ believe that:

• The U.S. economy will grow about 2%, while emerging markets post stronger growth and Europe experiences a mild recession.

• The U.S. stock market is likely to post an 8 – 12%* gain, supported by a slight improvement in valuations and mid-to-high single-digit earnings growth.

• Corporate bonds post modest single-digit gains as interest rates rise and credit spreads narrow. The yield on the 10-year Treasury is likely to end the year around 3%.

*LPL Financial Research provided this range based on its earnings per share growth estimate for 2012, and a modest expansion in the price-to-earnings ratio. Additional explanation can be found throughout the 2012 Outlook publication.

I personally believe the markets are poised for positive performance this year. In fact, recent US economic data suggests equity markets are priced as cheaply as they have been in decades, even if there is a 15% decline in earnings. However, the big issues, and my reasons for staying cautious this year, include how deep the European recession turns out to be and what kind of growth impact the discussions and decisions (or lack thereof) about our country’s looming deficit will have during this election year. I’m cautiously optimistic.

Tanya R. Mathews, CFP ®
Meridian Wealth Management Boulder 
tanya.mathews@lpl.com