Lowered Stocks view from Neutral/Positive to Neutral; Lowered U.S. Equities view from Neutral/Positive to Neutral; Raised Bonds view from Negative/Neutral to Neutral
This week we share our "Final Four Factors" for the stock market in 2019: 1-Policy, 2-the Economy, 3-Rates, and 4-Profits.
Following the stock market’s recent move higher, coupled with a slightly weaker economic and corporate profit outlook, the risk-reward trade-off in stocks has become less attractive.
WEC Description: February’s job growth was disappointing, but it followed the biggest two-month gain since 2016.
Earnings growth for the fourth quarter is tracking to a solid 17%, above prior estimates but below the pace of the previous three quarters.
Following last week’s rejection of Theresa May’s Brexit plan, we discuss what’s next for the United Kingdom and possible market implications.
S&P 500 earnings growth will slow in the fourth quarter but is still expected to be strong.
Our January Client Letter discusses the emotional toll of a challenging market environment, while reinforcing our confidence in the fundamentals supporting the economy and markets.
The S&P 500 Index came about as close as possible to the technical definition of a bear market without officially registering one.
Downgraded small growth from neutral to negative/neutral; Downgraded small value from neutral/positive to neutral; Upgraded large growth from negative/neutral to neutral; Downgraded hedged foreign bonds from neutral to negative/neutral.
The Executive Summary highlights key themes and LPL Research economic and market forecasts from Outlook 2019: FUNDAMENTAL: How to Focus on What Really Matters in the Markets
The LPL Research Outlook 2019: FUNDAMENTAL: How to Focus on What Really Matters in the Markets provides insightful commentary for the year ahead.
The LPL Research team proudly presents the LPL Research Outlook 2019: FUNDAMENTAL: How to Focus on What Really Matters in the Markets, with investment insights and market guidance for the year ahead.
Last week’s stock market rally was driven by optimism (now clearly warranted) surrounding U.S.-China trade talks and a more dovish Fed.
Third quarter earnings season was again very impressive, with S&P 500 Index earnings growing 28% year over year, the fastest pace since the fourth quarter of 2010.
Upgraded our view of mortgage-backed securities (MBS) from neutral to neutral/positive; Downgraded our view of bank loans to neutral from neutral/positive.
Getting past the midterm election removes uncertainty and enables investors to focus on fundamentals, which we believe can be positive for stocks.
When it comes to elections, the markets seem to seek clarity above all else; yet there are some policy implications to consider. We break down the 2018 midterm elections in this latest Client Letter.
We believe wage growth (and labor costs) will remain manageable amid the Fed’s gradual approach and changing labor market dynamics.
Within the four-year presidential cycle, this quarter and the following two quarters next year are historically the best for stocks.
The S&P 500 fell about 4% last week amid a myriad of concerns, among them possible peak earnings and a potentially overly aggressive Federal Reserve.
With about one-fifth of third quarter earnings results in, the numbers have been solid thus far despite tariffs and increasing wage pressures.
Several new readings on inflation last week confirmed that price pressures remain manageable, supporting a continued gradual path of rate hikes for the Federal Reserve (Fed).
This client letter addresses the recent market volatility. Although it can be difficult to experience these declines and volatility may continue in the near term, the underlying fundamentals of the economy and markets are positive and we see potential for...
Overall, economic reports released in September—mostly reflecting economic activity in August—indicated solid U.S. economic growth without significant inflationary pressures, though wage gains bear monitoring.
We expect global growth to slow in 2019 but remain strong enough to continue to support the broad global economy and markets.
U.S. economic and earnings growth continue to stand out globally and support our positive view of U.S. equities.
In this latest client letter, we look back on the strong growth and stock gains from the third quarter, and discuss key factors to watch as we kick off the last three months of the year.
We’ve just wrapped up the best quarter for the S&P 500 Index since the fourth quarter of 2013, despite a variety of challenges.
While the Fed raised its policy rate last week, the more important meeting outcome was the Fed’s guidance on future policy.
When the Dow hits a fresh record high after a long drought, as it did last week, it tends to be followed by above-average performance.
Overall, economic reports released in August—mostly reflecting economic activity in July—indicated solid U.S. economic growth without significant inflationary pressures, even though evidence grew of some cooling from trade concerns.
This Client Letter discusses recent positive indicators for U.S. economy and stocks, which we believe outweigh some areas for investor concern.
Signs of sustainable productivity growth are emerging, thanks to solid economic fundamentals and the tailwind of fiscal stimulus.
S&P 500 GICS sectors will undergo a significant shift later this month with a big revamp and expansion of the telecommunication services sector.
Recent Fed communication reinforced its view that gradual hikes were the appropriate response to a strong economy, near-target inflation, and balanced risks.
Second quarter earnings season was quite impressive, with S&P 500 Index earnings growing 25% year over year.
As the U.S. economic recovery moves into its later stages, inflation has emerged at a surprisingly slow and inconsistent rate.
Economic reports released in July 2018, largely reflecting economic activity in June, provided evidence of accelerating U.S. economic growth over the second quarter.
The Fed announced last Wednesday that it would keep interest rates unchanged, a decision that markets largely expected.
The Labor Department’s July jobs report, released on Friday, August 3, confirmed that the labor market remains healthy.
We share the most frequently asked questions from Focus 2018, on topics such as trade tensions, emerging markets, growth versus value, and the yield curve.
As we look back on the month of July, the standout stories for the summer so far have been strong U.S. economic growth and surging corporate profits. This latest Client Letter recaps these reports and emphasizes the importance of focusing...
The economy grew 4.1% in the second quarter, topping 4% for the first time since the third quarter of 2014.
In testimony to Congress, Fed Chair Powell largely stuck to the script, saying little to alter the Fed’s perceived course.
Consensus estimates are calling for a 21% year-over-year increase in S&P 500 earnings for the second quarter.
Downgraded large/small foreign equities to negative/neutral from neutral. Downgraded industrial metals to neutral from neutral/positive. Downgraded agriculture to negative/neutral from neutral.
Rates may be poised to rise further in the second half of 2018, though likely at a slower pace than the first half of the year.
The LPL Research Midyear Outlook 2018: The Plot Thickens provides insightful commentary to help you navigate the rest of the year.
The LPL Research team proudly presents the Midyear Outlook 2018: The Plot Thickens, with investment insights and market guidance covering the rest of the year.
"Economic reports released in June 2018, largely reflecting economic activity in May, showed continued solid economic growth in the U.S. and provided evidence of a pickup in growth from seasonally weak first quarter levels."
Although we believe investors will be spared an all-out trade war, spreads across fixed income sectors are pointing to heightened trade concerns.
Trade tensions between the U.S. and China have escalated in the last month, but negotiation still remains the main path forward.
The BOJ meeting last week was a nonevent, as expected, but last week's Fed and ECB meetings gave investors some minor surprises.
Increased business capital expenditures, or “capex,” remain one of the most important pieces for improving the long-term growth trajectory of the U.S. economy.
Investment-grade (IG) corporate bonds have been the worst-performing high-quality bond segment year to date.
The Fed is widely expected to raise rates for the second time this year at the conclusion of its policy meeting on Wednesday.
Overall, we think the global economic backdrop, particularly in the U.S., remains intact. Although the situation in Italy is an ongoing risk worth monitoring, we don’t believe it indicates a change in the trajectory of the global economy.
When we compare Europe’s economic and corporate fundamentals with those in the U.S., even factoring in valuations, we think Europe comes up short.
The Fed minutes’ emphasis on a symmetric inflation target reassured markets that the pace of rate hikes would remain gradual.
In this week’s commentary, we recap the outstanding near-complete first quarter earnings season, highlight some of the key themes, and show why a potential peak in earnings growth is not cause for immediate concern.
Consumers will feel the impact of higher oil prices, but the effect may be small compared to the benefits of a strong job market and the new tax law.
"May’s arrival has brought warmer weather to many parts of the U.S. (finally), but it also brings talk of one of the most widely cited stock market clichés in history: “Sell in May and go away.”
The Bond Market Perspectives "Search for Income" is a quarterly guide to our top ideas for income-producing strategies.
The yield curve has continued to flatten; however, because rates are rising simultaneously, it is a less ominous indicator for the economy relative to if yields were falling.
There are several market myths related to certain market indicators which have the tendency to distract investors from what really matters in assessing market opportunities.
“After a substantive increase in the first months of 2018, real yields have slowly declined, a positive indicator for stock and bond markets, as they suggest lower true cost of debt for domestic companies.”
“Spreads across various sectors of fixed income are signaling that areas of recent stress are receding, a positive omen for bonds and stocks alike.”
"Economic reports released in March 2018, largely reflecting economic activity in February, rebounded from subpar data released in February, putting the economy on track for solid but not spectacular first quarter growth. "
“We preview what we expect may be a very strong earnings season and highlight some key dynamics we will be watching.”
"While the month of April has opened with some volatile market swings, we should remain focused on the underlying drivers that have a longer-term impact on the markets and economy."
“Despite a late-quarter rally, high-quality fixed income had a difficult start to 2018, but the ride over the remainder of the year could be smoother.”
“This week’s Weekly Market Commentary recaps first quarter stock market performance, discusses some of the themes that were in play, and summarizes our outlook for the rest of the year.”
“The spread between the three-month London Interbank Offering Rate (LIBOR) and the Overnight Indexed Swap (OIS) has widened to its highest level since 2008.”
“We share our “Final Four Factors” for the stock market in 2018: economic growth, earnings, trade policy, and the midterm elections.”
"Although sometimes markets react negatively to rate hikes, these increases tend to signal the Fed’s confidence in the U.S. economy."
“Short-term high-quality bond yields have continued to increase since the lows seen in July 2016, and have moved sharply higher since September 2017.”
"The February employment report crushed expectations for the number of jobs created (313,000 versus the consensus expectation of 205,000), but wage growth moderated from the surprising January levels."
“Our Five Forecasters are collectively indicating that further economic growth and stock market gains appear likely.”
"Economic reports released in February 2018, largely reflecting economic activity in January, signaled continued steady growth though mixed with rising inflation."
“The bull market will celebrate its ninth birthday on March 9, 2018. This week, we look at some of our favorite bull market indicators and the signals that accompany them.”
“We have raised our 2018 S&P 500 EPS forecast from $147.50 to $152.50 and our S&P 500 year-end fair value target to 2950–3000.”
"Many important economic reports were released last week and collectively they showed continued strength in the U.S. economy."
"With rising rates making high-quality fixed income more attractive, many fixed income investors may be asking, why own bonds?"
“After an extraordinary two-year period of market calm, the major U.S. equity markets slipped into correction territory last week.”
"Low overall inflation again carried over to common Valentine’s Day gifts in 2017, with prices rising at or below the average pace."
"January 2018 saw December’s trend of above-consensus economic reports taper off, though the data suggests strong underlying fundamentals in the U.S. economy, supported by solid consumer spending."
"Yields have started 2018 off on a volatile note, which has been somewhat painful and disconcerting for fixed income investors."
"Although it can be difficult to experience these declines, the underlying fundamentals of the economy and markets are pointing to the potential for continued growth in 2018 and beyond."
“Friday’s sharp stock market decline might have led us to forget that just a few days ago many claimed the stock market was melting up.”
“Jerome Powell will take over as Fed chair on February 3 and may continue the path of data-dependent, gradual rate hikes laid out by his predecessor, Janet Yellen.”
"Treasury yields have seen a significant increase since early September 2017, but credit markets aren’t showing any signs of stress."
“We expect a solid fourth quarter earnings season and believe a 14–16% year-over-year increase in S&P 500 earnings is achievable.”
"Dollar weakness in 2017 helped propel unhedged foreign developed bonds and U.S. dollar-denominated EMD to strong performance."
"Global economic growth was stronger than expected in 2017, and we anticipate moderate acceleration in 2018."
"Economic reports released in December 2017, which mostly reflect economic activity in November, largely exceeded economists’ consensus expectations and suggested continued steady growth in the U.S. economy. "
"We look back at U.S. fixed income performance in 2017, while exploring what themes may persist in 2018."
“We close the book on a solid 2017 for U.S. stocks while tipping our caps to a strong start to 2018.”
“The new law is intended to boost economic activity and simplify the U.S. tax code.”
“The new law is intended to boost economic activity and simplify the U.S. tax code.”
"The new law is intended to boost economic activity and simplify the U.S. tax code."