In summary, short-term earnings growth behaves very differently from GDP growth though they have a robust positive relationship in the long run. In 2019, we expect earnings growth to fall close to its long-term equilibrium level since the impact of tax cuts have faded. Assuming 2-3% GDP forecast for this year, a 4-6% increase in earnings would seem like a reasonable estimate.

Liam Flaherty is a research analyst at Julex Capital Management, a participant in the ETF Strategist Channel.

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