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Inverted yield curve and high inflation have increased fears of recession.  The strategists note that historically the shorter end of the yield curve has been a better predictor of recessions. Further, services spending has a lot of runway left to boost the economy and points to a rebound in the second half of the year. 


Inflation is eroding consumer spending and consumers’ savings cushion. However, the market seems to be sniffing out a potential near-term inflation peak, if not already achieved with the March data. LPL Research still believes prospects look good for inflation to fall in the second half of the year. Commodity prices may come down if the Ukraine conflict reaches a peaceful resolution. Supply chain pressures should abate as COVID-19 wanes. And as labor supply improves, wage gains may slow. Notably, falling inflation didn’t result in recessions in the mid 1980s and mid 1990s.


Consensus earnings estimates have risen this year, a good sign for 2022 earnings. Although Q1 estimates have dipped 1.5%, that is less than the typical reduction ahead of earnings season. The strategists believe 8-9% earnings growth for S&P 500 Index companies overall, a reasonable base case, would be impressive given the headwinds.  Companies have done an amazing job managing costs in recent quarters and preserving profit margins.

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This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks including possible loss of principal. Any economic forecasts set forth in the podcast may not develop as predicted and are subject to change.

References to markets, asset classes, and sectors are generally regarding the corresponding market index. All indexes are unmanaged and cannot be invested into directly. Index performance is not indicative of the performance of any investment and do not reflect fees, expenses, or sales charges. All performance referenced is historical and is no guarantee of future results.

Any company names noted herein are for educational purposes only and not an indication of trading intent or a solicitation of their products or services. LPL Financial doesn’t provide research on individual equities. All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy.

All index data is from FactSet.

All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy.

This Research material was prepared by LPL Financial, LLC. 


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