Capital Markets: Observations & Insights

Fundamentals

Leading Indicators Suggest Earnings Will Continue to Rise

• The Conference Board Leading Economic Index (LEI) typically leads earnings by 6-18 months and usually peaks one to two years prior to a recession • Given that the LEI is increasing solidly year-over-year and hit a record high in 3Q17, we believe the economy and earnings have room to run

130

Leading Economic Index indicates further EPS growth

$150

120

$130

18 Month Lead

S&P 500 EPS

110

$110

100

$90

90

$70

Leading Economic Index

80

$50

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

Source: FactSet, Conference Board as of September 2017. Based on NTM EPS estimates.

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