With Alcoa kicking off the unofficial start of the third-quarter earnings season after Wednesday’s close, investor attention shifts from the Federal Reserve back to corporations, and what they have to say about the final quarter of the year and 2015.
And, as many market observers on Wednesday fixated on when the central bank will start raising interest rates, the real question is what would motivate the move, said David Lafferty, chief market strategist at Natixis Global Asset Management. Addressing the outlook for next year, when the Fed is expected to increase short-term rates, Lafferty also pondered whether the underlying environment is conducive to corporate profits.
Will Fed tightening come in “an environment of real growth and low inflation or because its hand is forced by a rise in wages and commodity prices?” asked Lafferty, who believes the former scenario will prevail. More moderate stock gains in 2014 than last year will be “driven by earnings, rather than multiple earnings expansion,” he added.