MARKET CALL: Crosscurrents & Riptides

January could start the year off with some volatility in the bond and stock markets. There are lots of fundamental and technical crosscurrents and a few possible riptides. The Q4 earnings reporting season during January should show a solid increase in S&P 500 operating earnings per share of at least 8.5% y/y (chart). We expect closer to a 10.0% increase since positive earnings surprises regularly occur when the economy is growing.

Q4's real GDP won't be reported until January 30, but along the way, the Atlanta Fed's GDPNow tracking should show that it is likely to be around 3.0% (saar) with a solid increase in consumer spending. Nevertheless, the following could be sources of some turbulence: