Bonds Get Disappointed

Dr. Jeffrey Roach, Chief Economist at LPL Financial, discusses the latest growth outlook, impacts on earnings, and recent staffing activity.

Last Edited by: LPL Research

Last Updated: January 09, 2025

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Jeffrey Roach:

Hi, I'm Jeffrey Roach, Chief Economist for LPL Financial, with three things to highlight in the macro landscape. So first off, corporate profits follow the economy. So when the economy grows, firms experience greater demand for their products and services leading to higher revenue and consequently higher operating earnings. This positive correlation means that as nominal GDP expands operating earnings of companies tend to grow as well, benefiting from the broader economic momentum. We think higher new orders hints at solid growth in corporate capital expenditures and will be one of the drivers of GDP growth in 2025. So earnings could grow in the high single- to lower double-digits. Second, sticky inflation impacting yields. Purchasing managers, those with boots on the ground, reported another increase in prices paid, a sign of nagging inflation pressures for both those in the manufacturing sector and those in the services sector. As firms continue to report higher input prices, investors are coming to grips with the Fed not cutting as much as originally thought, and hence yields are rising and not just in the U.S. And at this point, we don't see any reversals to this pressure on yields. Third, hiring plans are softening. Some industry data are hinting at a softening of hiring across the economy. This chart is from the American Staffing Association, gives us a current snapshot of staffing activity and hitting a new near-term low. We really haven't seen a spike in layoffs, but we do think investors should expect the labor market to cool throughout this year. Well, that's all for now. If you want more insights on global market trends, follow us on social media and take care.

 

Dr. Jeffrey Roach, Chief Economist at LPL Financial, discusses the latest growth outlook, impacts on earnings, and recent staffing activity.

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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.

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