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Posted by lplresearch

Economic Blog

In the recent LPL Market Street View video, LPL Financial’s Chief Market Strategist Ryan Detrick discusses why the recession is likely over, making it one of the shortest recessions ever.

Some reasons discussed include:

• Historically, new stock market highs have ended recessions, as the stock market is more forward looking
• Extremely strong housing data and impressive earnings guidance from corporate America
• Multi-year highs in copper are suggesting the global economy is improving significantly
• Lastly, manufacturing data has been quite strong and small businesses remain optimistic

You can watch the full discussion below, direct from our YouTube channel. Please be sure to subscribe to our YouTube channel, so you don’t miss anything!

IMPORTANT DISCLOSURES

This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks including possible loss of principal. Any economic forecasts set forth may not develop as predicted and are subject to change.

References to markets, asset classes, and sectors are generally regarding the corresponding market index. Indexes are unmanaged statistical composites and cannot be invested into directly. Index performance is not indicative of the performance of any investment and do not reflect fees, expenses, or sales charges. All performance referenced is historical and is no guarantee of future results.

Any company names noted herein are for educational purposes only and not an indication of trading intent or a solicitation of their products or services. LPL Financial doesn’t provide research on individual equities. All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy.

All index and market data from FactSet and MarketWatch.

This Research material was prepared by LPL Financial, LLC.

Securities and advisory services offered through LPL Financial (LPL), a registered investment advisor and broker-dealer (member FINRA/SIPC).

Insurance products are offered through LPL or its licensed affiliates.  To the extent you are receiving investment advice from a separately registered independent investment advisor that is not an LPL affiliate, please note LPL makes no representation with respect to such entity.

• Not Insured by FDIC/NCUA or Any Other Government Agency
• Not Bank/Credit Union Guaranteed
• Not Bank/Credit Union Deposits or Obligations
• May Lose Value

Posted by lplresearch

Market Blog

Index Performance

S&P 500 Index:  -2.3%

Dow Jones Industrial Average:  -1.8%

Nasdaq Composite:  -3.3%

US and International Equities

The equity markets sold off this week after a strong summer advance. Technology stocks, the year’s best-performing sector, led the market lower along with the Nasdaq. Given the weakness in technology, large cap value topped growth. Consumer staples, financials, materials, and utilities showed relative strength amid the weakness, while small caps’ fall was roughly in line with large caps’.

International stocks followed the US markets lower this week. Both the developed international and emerging market indexes, as denoted by MSCI EAFE and MSCI EM Indexes, posted negative returns. Japan’s Nikkei bucked the trend, gaining 1.4%.

The S&P 500 Index has finished higher in five consecutive months, the longest monthly win streak since six in a row in 2018. However, historically, gains have continued after such win streaks that hasn’t meant that gains were over. In fact, since 1957, the S&P 500 has had 26 other five-month win streaks and a year later it was higher 25 times. We discussed this in depth on the LPL Research blog.

“What a week, from new highs to many stocks down double digits,” explained LPL Financial Chief Market Strategist Ryan Detrick. “The truth is stocks were historically overbought in some cases, so this pullback is perfectly normal and probably healthy.”

Fixed Income, Currencies, and Commodities

High-quality bond returns were little changed this week, as market weakness drove Treasury yields lower late in the week. Commodities were broadly lower this week, as the US dollar bounced from oversold conditions. Gold fell more than 1%, while WTI crude oil prices fell back below $40 per barrel for the first time in four weeks.

The US dollar’s recent weakness versus the euro was in focus for top policymakers at the European Central Bank (ECB), which warned that if the euro keeps appreciating, it will weigh on exports, drag down prices, and intensify pressure for more monetary stimulus. Several members of the ECB’s governing council told the Financial Times that the euro’s rise versus the US dollar and other currencies risks holding back the Eurozone’s economic recovery, especially in the face of weak demand. Given the Federal Reserve’s (Fed) work on updating its strategic framework, the ECB feels a need to respond with its own review.

US Economic Data Recap

The week’s economic data was highlighted by the release of the August jobs report on Friday by the US Bureau of Labor. August nonfarm payrolls came in near expectations at 1.4 million jobs created, down from last month’s 1.7 million jobs. The unemployment rate declined to 8.4% versus an expected 9.8%. The report helped allay concerns about the pace of labor market improvement.

In other monthly data, the August Institute for Supply Management (ISM) manufacturing index increased to 56.0, above the consensus of 54.5 (Bloomberg). The index is at its highest level since November 2018. August was the third consecutive month above 50, the level that indicates expansion. New orders were over 67, the highest level since January 2004, while 9 of the 11 components also expanded. Improving manufacturing is a global theme, as China Caixin Manufacturing Purchasing Managers’ Index (PMI) also came in at a nine-year high.

Finally, the latest release of the Fed’s Beige Book, a qualitative survey of the Fed’s reporting districts, revealed that economic activity has improved modestly and Main Street sentiment is on the mend. Improvement was particularly pronounced in manufacturing and housing activity, while employment generally improved among reporting districts. While the Beige Book noted that considerable uncertainty remains, improving sentiment shows that policy actions have helped to stabilize the economy and growth is returning.

Looking Ahead

Next week, the following economic data is slated to be released:

• Economic data on Tuesday begins with August’s National Federation of Independent Business’s (NFIB) Small Business Index. Plus, July’s consumer credit from the Fed will be released.
• Wednesday is about the Job Opening and Labor Turnover Survey (JOLTS) for July from the US Bureau of Labor Statistics.
• Thursday provides investors another anticipated weekly initial unemployment claims report. August Producer Price Index (PPI) data also will be released.
• We wrap up the week Friday with the August Consumer Price Index (CPI), hourly earnings, average workweek, along with the Treasury Budget.

IMPORTANT DISCLOSURES

This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks including possible loss of principal. Any economic forecasts set forth may not develop as predicted and are subject to change.

References to markets, asset classes, and sectors are generally regarding the corresponding market index. Indexes are unmanaged statistical composites and cannot be invested into directly. Index performance is not indicative of the performance of any investment and do not reflect fees, expenses, or sales charges. All performance referenced is historical and is no guarantee of future results. All market and index data comes from FactSet and MarketWatch.

Any company names noted herein are for educational purposes only and not an indication of trading intent or a solicitation of their products or services. LPL Financial doesn’t provide research on individual equities. All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy.

U.S. Treasuries may be considered “safe haven” investments but do carry some degree of risk including interest rate, credit, and market risk. Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise and bonds are subject to availability and change in price.

For a list of descriptions of the indexes referenced in this publication, please visit our website at lplresearch.com/definitions.

This Research material was prepared by LPL Financial LLC.

Securities and advisory services offered through LPL Financial (LPL), a registered investment advisor and broker-dealer (member FINRA/SIPC).

Insurance products are offered through LPL or its licensed affiliates.  To the extent you are receiving investment advice from a separately registered independent investment advisor that is not an LPL affiliate, please note LPL makes no representation with respect to such entity.

• Not Insured by FDIC/NCUA or Any Other Government Agency
• Not Bank/Credit Union Guaranteed
• Not Bank/Credit Union Deposits or Obligations
• May Lose Value

Posted by lplresearch

Economic Blog 

The jobs market remains strong, as the August nonfarm payrolls came in at a solid 1.37 million jobs created, right in line with expectations. This was the fourth consecutive month of gains, up 10.6 million over this time frame. In March and April more than 22 million jobs were lost, so we still aren’t quite to half of the jobs recovered though.

This was the second consecutive month there was a very weak ADP private payrolls number ahead of the monthly jobs report, adding to the worries, but the actual nonfarm payroll number was once again quite solid. Don’t forget, just yesterday we saw initial jobless claims come in at 881,000, the lowest number since the week ending March 14, another improving employment number.

The big surprise in today’s report though was the unemployment rate fell to 8.4%, from 10.2% last month and an expected 9.8%. This was the lowest unemployment rate since 4.4% in March.

“This was an impressive report and once again showed the economy remained quite resilient,” explained LPL Financial Chief Market Strategist Ryan Detrick. “But 8% unemployment is 8% unemployment, so let’s not get too excited, but we’ll still take this improving trend in the employment picture.”

As shown in the LPL Chart of the Day, even though more than 10 million jobs have been created in the past four months, the sad truth is we are still quite a long way from recovering all the jobs lost due to the pandemic. In fact, looking at previous cycles, it has taken years for all of the lost jobs to come back and this time doesn’t appear any different.

View enlarged chart.

View enlarged chart. One thing to consider is could this solid number make it harder for Washington to agree on the next stimulus plan? We are watching this closely, but with the two sides still close to a trillion dollars apart, today’s report will likely do little to help the two sides come to a quick resolution.

Last, don’t forget that stocks gained more than 60% in less than six months, so some weakness would be perfectly normal. In fact, looking at the two previous strongest starts to a bull market ever (’82 and ’09) both saw some weakness right around now.

View enlarged chart.

IMPORTANT DISCLOSURES

This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks including possible loss of principal. Any economic forecasts set forth may not develop as predicted and are subject to change.

References to markets, asset classes, and sectors are generally regarding the corresponding market index. Indexes are unmanaged statistical composites and cannot be invested into directly. Index performance is not indicative of the performance of any investment and do not reflect fees, expenses, or sales charges. All performance referenced is historical and is no guarantee of future results.

Any company names noted herein are for educational purposes only and not an indication of trading intent or a solicitation of their products or services. LPL Financial doesn’t provide research on individual equities. All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy.

All index and market data from FactSet and MarketWatch.

This Research material was prepared by LPL Financial, LLC.

Securities and advisory services offered through LPL Financial (LPL), a registered investment advisor and broker-dealer (member FINRA/SIPC).

Insurance products are offered through LPL or its licensed affiliates.  To the extent you are receiving investment advice from a separately registered independent investment advisor that is not an LPL affiliate, please note LPL makes no representation with respect to such entity.

• Not Insured by FDIC/NCUA or Any Other Government Agency
• Not Bank/Credit Union Guaranteed
• Not Bank/Credit Union Deposits or Obligations
• May Lose Value

Posted by lplresearch

Economic Blog

The outbreak of COVID-19 caused considerable deterioration in the economy and left many wondering when we might expect conditions to improve. As historic stimulus measures were implemented to backstop the economy from outright collapse, many also wondered if this would be enough to restore sentiment to a level where economic activity would follow. We are now seeing the first stages of improving sentiment based on the results of the most recent Federal Reserve (Fed) Beige Book.

In the Beige Book, the Fed presents qualitative observations made by community bankers and business owners—or “Main Street”—about economic (housing, labor market, manufacturing, nonresidential construction, prices, tourism, wages) and banking conditions (lending conditions, loan demand, loan quality). At LPL Research, we maintain an indicator called the Beige Book Barometer (BBB) to gauge Main Street’s sentiment by looking at how frequently key words and phrases appear in the text.

As the LPL Chart of the Day shows, the Beige Book Barometer has flipped into positive territory for the first time since the beginning of the recession, suggesting sentiment is firmly on the rise.

View enlarged chart.

Strong words rose by 34, the second most increase since we began tracking the data in 2005, while weak words declined by 13. The notable rise in strong words mainly referenced the improvement in manufacturing activity and the residential real estate market, which continues the theme shown by recent new home sales and housing starts data. Broader economic activity grew at a modest pace along with a pick up in consumer spending—though still below pre-pandemic levels.

However, while the general outlook was mostly optimistic, survey results pointed toward continued uncertainty in the path of the pandemic, and its effect on consumer and business activity was echoed across the country. We continue to see caution in the labor market, which despite further improvement, may point toward an uneven recovery should economic demand falter. As weekly jobless claims data has ebbed and flowed, this Friday’s nonfarm payrolls report should be key to determining the health of the labor market. Stay tuned to the LPL Research blog for updates.

IMPORTANT DISCLOSURES

This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks including possible loss of principal. Any economic forecasts set forth may not develop as predicted and are subject to change.

References to markets, asset classes, and sectors are generally regarding the corresponding market index. Indexes are unmanaged statistical composites and cannot be invested into directly. Index performance is not indicative of the performance of any investment and do not reflect fees, expenses, or sales charges. All performance referenced is historical and is no guarantee of future results.

Any company names noted herein are for educational purposes only and not an indication of trading intent or a solicitation of their products or services. LPL Financial doesn’t provide research on individual equities. All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy.

All index and market data from FactSet and MarketWatch.

This Research material was prepared by LPL Financial, LLC.

Securities and advisory services offered through LPL Financial (LPL), a registered investment advisor and broker-dealer (member FINRA/SIPC).

Insurance products are offered through LPL or its licensed affiliates.  To the extent you are receiving investment advice from a separately registered independent investment advisor that is not an LPL affiliate, please note LPL makes no representation with respect to such entity.

• Not Insured by FDIC/NCUA or Any Other Government Agency
• Not Bank/Credit Union Guaranteed
• Not Bank/Credit Union Deposits or Obligations
• May Lose Value

Posted by lplresearch

Market Blog

The S&P 500 Index just closed the door on its best August since 1986, making new all-time highs along the way, while also closing up five months in a row.

First things first, make no mistake about it; this is a new bull market. That of course doesn’t mean it will last years like previous bull markets, but a nearly 57% gain in 5 months is what we’d classify as a bull market.

Here are all the bull markets going back to the Great Depression and where this one ranks.

 View enlarged chart.

Now let’s dig into the 5 month win streak. It is quite rare for stocks to gain from April through August, as the summer months tend to be somewhat tricky. Yet, we found there were six other years that saw these 5 months all close higher and the rest of the year was higher 4 times, with some solid returns in there. In fact, the only year that was lower the rest of the year was 2018, mainly due to the Fed policy mistake in December 2018.

View enlarged chart.

“What might surprise many investors is 5 month win streaks are actually incredibly bullish going forward,” explained LPL Financial Chief Market Strategist Ryan Detrick. “In fact, a year after a 5 month win streak has seen the S&P 500 higher 25 of the past 26 times.”

As shown in the LPL Chart of the Day, the S&P 500 Index gained more than 35% during this 5 month win streak, the most ever. Yet, the future gains after 5 month win streaks is very impressive, higher 25 out of 26 times a year later. An object in motion tends to stay in motion and this sure seems to be the case here.

View enlarged chart.

For more of our investment insights on the record breaking August and what could be on tap in September, check out our latest LPL Market Signals podcast below.

IMPORTANT DISCLOSURES

This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks including possible loss of principal. Any economic forecasts set forth may not develop as predicted and are subject to change.

References to markets, asset classes, and sectors are generally regarding the corresponding market index. Indexes are unmanaged statistical composites and cannot be invested into directly. Index performance is not indicative of the performance of any investment and do not reflect fees, expenses, or sales charges. All performance referenced is historical and is no guarantee of future results.

Any company names noted herein are for educational purposes only and not an indication of trading intent or a solicitation of their products or services. LPL Financial doesn’t provide research on individual equities. All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy.

All index and market data from FactSet and MarketWatch.

This Research material was prepared by LPL Financial, LLC.

Securities and advisory services offered through LPL Financial (LPL), a registered investment advisor and broker-dealer (member FINRA/SIPC).

Insurance products are offered through LPL or its licensed affiliates.  To the extent you are receiving investment advice from a separately registered independent investment advisor that is not an LPL affiliate, please note LPL makes no representation with respect to such entity.

• Not Insured by FDIC/NCUA or Any Other Government Agency
• Not Bank/Credit Union Guaranteed
• Not Bank/Credit Union Deposits or Obligations
• May Lose Value

Posted by lplresearch

Economic Blog

Federal Reserve (Fed) Chair Jerome Powell gave a significant speech at the annual central bank symposium at Jackson Hole last week in which he laid out the general conclusions of the Fed’s review of its Statement on Longer-Run Goals and Monetary Policy Strategy. That document outlines how the Fed goes about fulfilling its congressionally assigned mandate of stable prices and maximum sustainable employment. The short version of the outcome: The Fed will let inflation run a little hotter than it might have in the past and short-term rates, at least, will be lower for longer.

“Under the Fed’s new guidelines, it may have not raised rates as aggressively in 2017 and 2018,” said LPL Financial Chief Market Strategist Ryan Detrick. “Does that mean President Trump was right that the Fed raised rates too aggressively? Give him his due—his instincts were probably right, although it might have been for the wrong reason.”

The Fed is changing the way it’s looking at inflation. Its target hasn’t changed. It’s still 2%.  But rather than aiming to be at 2%, give or take, at any particular moment it’s going to look for something more like an average of 2% over a whole cycle. If inflation runs below that target for a period, it can be allowed to run a little hot as long as there’s a clear path to getting it back to 2% without harming the economy.

While probably too constrained compared with the policy, in today’s LPL Chart of the Day, we look at the difference that just averaging inflation over one year might have made, using the core version (excluding volatile food and energy prices) of personal consumption expenditure (PCE) inflation, the Fed’s preferred measure.

View enlarged chart. 

What difference would have this new goal made? It’s hard to know, since Powell’s Jackson Hole speech was only a preliminary statement on changes in policy, inflation targeting was only one piece, and assessing the economy in real time is more complicated than a backward-looking exercise. Just using a one-year average, inflation would not have even looked like it was reaching the 2% target until 2018, so the Fed almost certainly would have been more restrained. Looking at it from the perspective of the cycle, which is probably closer to the actual policy, from 2008 to 2016, a nine-year period, core PCE averaged just 1.5%, topping 2% only once over a calendar year (2011). That means the Fed might have been comfortable letting inflation run closer to 2.5% for an extended period, and possibly 3% for a few years, before starting to pump the breaks on the economy.

The change seems academic in a way. Why are we talking about the Fed letting inflation run at 2.5 or 3% if the Fed hasn’t been able to get it up to 2%? The key, though, is it changes expectations, and inflation expectations actually have a meaningful impact on realized inflation. It also helps signal that the Fed is likely to keep rates low for an extended period, delaying speculation about prospective rate hikes until the economy is solidly standing on its own two feet. So yes, if this policy were in place the Fed probably would not have raised rates in 2015, or 2016, and might not have in 2017 or 2018. The downside to all that? With rates lower for longer, the Fed potentially blunts one of its most important policy tools, its ability to lower rates in future economic slowdowns.

IMPORTANT DISCLOSURES

This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks including possible loss of principal. Any economic forecasts set forth may not develop as predicted and are subject to change.

References to markets, asset classes, and sectors are generally regarding the corresponding market index. Indexes are unmanaged statistical composites and cannot be invested into directly. Index performance is not indicative of the performance of any investment and do not reflect fees, expenses, or sales charges. All performance referenced is historical and is no guarantee of future results.

Any company names noted herein are for educational purposes only and not an indication of trading intent or a solicitation of their products or services. LPL Financial doesn’t provide research on individual equities. All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy.

All index and market data from FactSet and MarketWatch.

This Research material was prepared by LPL Financial, LLC.

Securities and advisory services offered through LPL Financial (LPL), a registered investment advisor and broker-dealer (member FINRA/SIPC).

Insurance products are offered through LPL or its licensed affiliates.  To the extent you are receiving investment advice from a separately registered independent investment advisor that is not an LPL affiliate, please note LPL makes no representation with respect to such entity.

• Not Insured by FDIC/NCUA or Any Other Government Agency
• Not Bank/Credit Union Guaranteed
• Not Bank/Credit Union Deposits or Obligations
• May Lose Value

Posted by lplresearch

Market Blog

What a month August has been so far, with the S&P 500 Index up more than 7%, for the best August since 1984. Not to be outdone, this is the first time in history August saw two separate 6-day (or more) win streaks. Last, with one day to go, the S&P 500 has gained 16 days so far this month, for the most since 16 in April 2019. Meanwhile, it is the most up days for any August since 2003.

“Well, 2020 has laughed at many of these things, but be aware September is indeed the worst month of the year on average,” explained LPL Financial Chief Market Strategist Ryan Detrick. “But what caught our attention was both September and October have a negative return during election years, with October the worst month of the year. Could investors get election jitters again in 2020?”

As show in the LPL Chart of the Day, September tends to be a weak month. In fact, it is the weakest month on average since 1950. Additionally, the last two times August was up more than 5% were 1986 and 2000; the S&P 500 fell 8.5% and 5.4% in September those years.

View enlarged chart.

Breaking things down by just an election year shows that August actually tends to be strong. That obviously played out this year, but now will the weakness we usually see in September and October play out?

View enlarged chart.

Finally, after today, the S&P 500 will be up 5 consecutive months. Looking at the other years that saw a similar summer rallies, there tended to be more strength the final 4 months of the year, with only the Federal Reserve policy mistake of December 2018 blemishing this impressive track record.

View enlarged chart.

Yes, this record equity run is extremely stretched, but we would continue to use any pullbacks as an opportunity to add to longer-term core equity holdings, as the economy continues to come back quicker than most expected.

IMPORTANT DISCLOSURES

This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks including possible loss of principal. Any economic forecasts set forth may not develop as predicted and are subject to change.

References to markets, asset classes, and sectors are generally regarding the corresponding market index. Indexes are unmanaged statistical composites and cannot be invested into directly. Index performance is not indicative of the performance of any investment and do not reflect fees, expenses, or sales charges. All performance referenced is historical and is no guarantee of future results.

Any company names noted herein are for educational purposes only and not an indication of trading intent or a solicitation of their products or services. LPL Financial doesn’t provide research on individual equities. All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy.

All index and market data from FactSet and MarketWatch.

This Research material was prepared by LPL Financial, LLC.

Securities and advisory services offered through LPL Financial (LPL), a registered investment advisor and broker-dealer (member FINRA/SIPC).

Insurance products are offered through LPL or its licensed affiliates.  To the extent you are receiving investment advice from a separately registered independent investment advisor that is not an LPL affiliate, please note LPL makes no representation with respect to such entity.

• Not Insured by FDIC/NCUA or Any Other Government Agency
• Not Bank/Credit Union Guaranteed
• Not Bank/Credit Union Deposits or Obligations
• May Lose Value

Posted by lplresearch

Market Blog

This Sunday, Warren Buffett turns 90 years young.

“What can we say about one of the greatest investment minds that hasn’t already been said?” asked LPL Financial Chief Market Strategist Ryan Detrick. “We don’t think we can say anything new, so to celebrate his birthday, we’ll let him say it.

In no particular order, here are some of LPL Research’s favorite Warren Buffet quotes.

“Every decade or so, dark clouds will fill the economic skies, and they will briefly rain gold. When downpours of that sort occur, reach for a bucket.”

“It is not necessary to do extraordinary things to get extraordinary results.”

“Only when the tide goes out do you discover who’s been swimming naked.”

“It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you’ll do things differently.”

“Long ago, Ben Graham taught me that ‘Price is what you pay; value is what you get.’ Whether we’re talking about socks or stocks, I like buying quality merchandise when it is marked down.”

“In the short term, the market is a voting machine. In the long term, the market is a weighing machine.”

“Diversification is a protection against ignorance. It makes very little sense for those who know what they’re doing.”

“The difference between successful people and really successful people is that really successful people say no to almost everything.”

“I’ve seen more people fail because of liquor and leverage — leverage being borrowed money. You really don’t need leverage in this world much. If you’re smart, you’re going to make a lot of money without borrowing.”

“The stock market is a device for transferring money from the impatient to the patient.”

And our favorite quote is:

“I checked the actuarial tables, and the lowest death rate is among 6-year-olds, so I decided to eat like a 6-year-old.”

Here’s to a great birthday weekend for Uncle Warren and another year of sharing his investment knowledge, along with a lot of McDonald’s food and Coke along the way!

IMPORTANT DISCLOSURES

This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks including possible loss of principal. Any economic forecasts set forth may not develop as predicted and are subject to change.

References to markets, asset classes, and sectors are generally regarding the corresponding market index. Indexes are unmanaged statistical composites and cannot be invested into directly. Index performance is not indicative of the performance of any investment and do not reflect fees, expenses, or sales charges. All performance referenced is historical and is no guarantee of future results.

Any company names noted herein are for educational purposes only and not an indication of trading intent or a solicitation of their products or services. LPL Financial doesn’t provide research on individual equities. All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy.

All index and market data from FactSet and MarketWatch.

This Research material was prepared by LPL Financial, LLC.

Securities and advisory services offered through LPL Financial (LPL), a registered investment advisor and broker-dealer (member FINRA/SIPC).

Insurance products are offered through LPL or its licensed affiliates.  To the extent you are receiving investment advice from a separately registered independent investment advisor that is not an LPL affiliate, please note LPL makes no representation with respect to such entity.

• Not Insured by FDIC/NCUA or Any Other Government Agency
• Not Bank/Credit Union Guaranteed
• Not Bank/Credit Union Deposits or Obligations
• May Lose Value

Posted by lplresearch

Market Blog

The incredible rally off the March 23 bear market bottom continues, with the S&P 500 Index up more than 50% from those fateful lows. It feels like a lifetime since the longest bull market ever ended. Remember though, although the recent bull market was the longest, it wasn’t the greatest, as the 1990s bull gained more on a percentage basis.

View enlarged chart.

We discussed in detail what the new highs in the S&P 500 meant here, so we won’t dive into that again. But this time we’ll show just how this rally ranks versus others that ended major bear markets. As shown in the LPL Chart of the Day, this new bull market, up to this point of about five months, is stronger than any other major bull market’s start going back to World War II.

View enlarged chart.

“Yes, this new bull market is the strongest bull market we’ve ever seen after five months,” explained LPL Chief Market Strategist Ryan Detrick. “But that shouldn’t be a source of worry. The previous two strongest rallies up to this point were in 1982 and 2009, and both saw continued strength during the first year of the new bull market.”

Here is a chart showing just this bull market and the ’82 and ’09 bull markets.

View enlarged chart.

For more of our thoughts on this new bull market, please watch our latest LPL Market Signals podcast on YouTube below.

IMPORTANT DISCLOSURES

This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks including possible loss of principal. Any economic forecasts set forth may not develop as predicted and are subject to change.

References to markets, asset classes, and sectors are generally regarding the corresponding market index. Indexes are unmanaged statistical composites and cannot be invested into directly. Index performance is not indicative of the performance of any investment and do not reflect fees, expenses, or sales charges. All performance referenced is historical and is no guarantee of future results.

Any company names noted herein are for educational purposes only and not an indication of trading intent or a solicitation of their products or services. LPL Financial doesn’t provide research on individual equities. All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy.

All index and market data from FactSet and MarketWatch.

This Research material was prepared by LPL Financial, LLC.

Securities and advisory services offered through LPL Financial (LPL), a registered investment advisor and broker-dealer (member FINRA/SIPC).

Insurance products are offered through LPL or its licensed affiliates.  To the extent you are receiving investment advice from a separately registered independent investment advisor that is not an LPL affiliate, please note LPL makes no representation with respect to such entity.

• Not Insured by FDIC/NCUA or Any Other Government Agency
• Not Bank/Credit Union Guaranteed
• Not Bank/Credit Union Deposits or Obligations
• May Lose Value

Posted by lplresearch

Economic Blog

As the economy begins to recover, with the early stage more robust than expected, we increasingly get asked when interest rates will move meaningfully higher. As shown in the LPL Chart of the Day, historically rates don’t start to move higher until a median of about two years after a recession starts, and five of the last seven recessions were at least 20 months.

“The first month of this recession was back in March, so historically you would expect rates to stay stable or even fall until early 2022,” said LPL Financial Chief Market Strategist Ryan Detrick. “But with a short recession, progress on treatments or a vaccine helping to address the recession’s underlying cause, and massive fiscal and monetary stimulus, we expect to be on the shorter end of history this time around.”

View enlarged chart.

Yield levels are generally driven by three things: 1) economic growth; 2) inflation; and 3) central bank policy. Stocks, at least, seem to be signaling a strong return to economic growth and are one piece of evidence showing how time has become compressed for this particular recession. The S&P 500 Index has already set a new all-time high, taking just five months to recover, compared with an average of 30 months for bear markets during recessions (5 Charts to see with Stocks at All-Time Highs).

Stimulus could certainly add to inflationary pressure, but it will take time for the economy to return to full capacity, including employment levels, which will likely limit inflation in the intermediate term. While our longer-term inflation expectations have moved higher, intermediate term concerns remain limited.

What’s most likely to extend the low rate period? The Federal Reserve (Fed) is likely to stay on hold for some time, and is exploring a revised policy framework that may even let inflation run a little hot before it starts raising rates. (Watch for more headlines around the revised policy framework when Fed Chair Jerome Powell speaks at the virtual Jackson Hole symposium later this week.) But policy also includes bond purchases, and even the possibility that purchases would start to wind down helped push rates higher in the last expansion. Still, overall, we expect the Fed to try to anchor rates for some time.

So much about this recession is occuring in a compressed time frame, and we expect the start of a move higher for the 10-year Treasury yield to follow suit. But given how long it’s taken historically for interest rates to start to reverse after recessions and the time it will take for the economy to return to full potential and inflationary pressures to start to build, we expect any move higher to be measured in the near term.

For more of our investment insights, check out our Midyear Outlook 2020: The Trail to Recovery.

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All index and market data from FactSet and MarketWatch.

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