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Posted by lplresearch

Market Blog

We are in the home strech of the US election season, with stocks potentially suggesting a President Trump victory, while the economy is on the side of Joe Biden. Although the next President is very important, maybe even more important is for more voices to be heard.

“In 2016, 40% of all eligible voters didn’t show up to the booth to cast their voice,” explained LPL Financial Chief Investment Officer Burt White. “Worst yet, if ‘I did not vote’ was a candidate in the 2016 election, they would have won 41 states!”

This week in the latest LPL Street View, Burt explains what the most powerful force is in politics and why all of our voices need to be heard.

You can watch the full video 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

Market Blog

This week in the LPL Market Signals podcast, LPL Financial’s Chief Market Strategist Ryan Detrick and Equity Strategist Jeff Buchbinder discuss if the recession is over already. “Much of the recent economic data indeed would suggest the recession is over, or on life support,” according to Ryan.

They also discuss:

• Mining gold in outer space
• Why the strong productivity number could mean the recession is over
• The best 100 days ever for stocks
• Inflation worries
• And a much better than expected second quarter earnings season

You can watch the full discussion below, direct from our YouTube channel.

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

“Better late than never.”

It took a while, but the S&P 500 Index finally made a new all-time high, coming all the way back from the vicious 34% bear market in less than six months.

View enlarged chart.

It might bring back some scary memories, but back in March it took the S&P 500 only 16 days to go from new highs to a bear market (down 20%), the fastest ever.

View enlarged chart.

“This will go down as the fastest bear market ever, but also one of the fastest recoveries ever,” explained LPL Financial Chief Market Strategist Ryan Detrick. “Then again, we’ve never quite seen a recession and recovery like this, so maybe it isn’t a shock to see new highs this quickly.”

The bear officially lasted one month and took five months to recover the losses. Usually when there’s a bear market during a recession, it takes 30 months to recover those loses. This was the third-fastest ever, with only 3 months to recover from a bear market recession in the early ‘80s and 4 months to recover from a bear market in the early ‘90s.

View enlarged chart.

It seems like earlier this year and new highs were a lifetime ago, but the S&P 500 finally moved off unlucky 13, notching the 14^th new high of 2020.

View enlarged chart.

As shown in the LPL Chart of the Day, returns after a long time without new highs actually get better. One, three, six, and 12 months after the first new high in more than five months show stronger performance than average or after any new highs. Yet another reason to think that this bull market from a long-term point of view could have some more tricks up its sleeve.

View enlarged chart.

Last, we found there were four other times the S&P 500 made a new high during a recession: In February ’61, July ’80, November ’82, and March ’91. Incredibly, a new expansion started the following month every single time. Could stocks at new highs be signaling an end to this recession? We think that very well could be the case again this time.

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

August 14, 2020

The S&P 500 Index has been flirting with a new all-time high the past few days and is currently less than half a percent away from exceeding the last all-time high set on February 19.

What a different world it is from that last new high, as we’ve experienced one of the worst recessions ever, seen the fastest ever bear market decline and a historic market rally, while millions of people have lost their jobs and tragically more than 160,000 Americans have lost their lives (John Hopkins).

Yesterday also marked 100 trading days ago since the March 23 low and the S&P 500’s best 100-day rally ever, up more than 50%. As the LPL Chart of the Day shows, previous large 100-day rallies usually saw continued gains, with stocks higher a year later 17 out of 18 times.

View enlarged chart.

“2020 is a year that is setting many records, some good and some bad, and now we have the best 100 day rally ever,” said LPL Financial Chief Market Strategist Ryan Detrick. “The real catch to this though is that previous big rallies usually saw continued strength, so don’t bet against this bull market just yet.”

Still, the number one question we continue to receive is how can stocks be back near highs, while the economy isn’t anywhere close to previous levels of output? We tackled this tough question this week in Dissecting the Disconnect, focusing on how the S&P 500 Index and Gross Domestic Product (GPD) are actually quite different.

Some of the key differences include:

• The S&P 500 is more manufacturing driven, while GDP is more services driven. The services economy was harder hit during the lockdowns and faces a tougher road back with social distancing than manufacturing.
• The S&P 500 is more investment driven rather than consumption driven. Capital investment has been supported by technology spending and has not been hit as hard as consumer spending during the pandemic. As a result, the S&P 500 has been more resilient to the pandemic. We also believe the value of tech-based intellectual property is better captured by the S&P 500 and its profits rather than the GDP calculation.
• The S&P 500 is global, while GDP is domestic. Roughly 40% of the sales for the S&P 500 are derived overseas, while US exports in the GDP calculation only make up 13% of US GDP. The US economy is a net importer, while the S&P 500 is a net exporter, which is why the S&P 500 prefers a weaker US dollar. A weaker dollar helps many US companies’ goods cheaper overseas and enhances international profits, while a strong dollar is good for US GDP because it lowers the cost of imports.
• The S&P 500 likes higher oil, while GDP likes cheaper oil. Profits for the energy sector benefit from higher oil prices, but higher energy costs crimp consumer spending. The industrials sector also generally benefits from higher oil prices through capital spending by energy producers.

Lastly, the S&P 500 Index has been stuck on unlucky 13 in terms of all-time highs this year. The strength we’ve seen recently does bode well for continued momentum and eventual new highs probably soon.

View enlarged chart.

We are proud to announce the LPL Market Signals podcast is now on YouTube and you can watch Ryan and Jeff Buchbinder discuss many of these concepts here.

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

We continue to follow high-frequency data to assess whether the US recovery remains on track or if it has been derailed by COVID-19 outbreaks in parts of the country. Here we look at 5 charts that illustrate that the economic recovery remains on track and help explain why stocks continue to do so well despite such difficult economic conditions (we discussed that disconnect in our latest Weekly Market Commentary and on this week’s LPL Market Signals podcast).

1) New COVID-19 cases and hospitalizations have fallen steadily in recent weeks. Of course we’d like these numbers to fall further but this progress is encouraging as some schools get ready to open—a potentially underrated factor for how the US economy performs this fall. This progress reduces the likelihood that lockdowns are reinstated while we wait for a medical breakthrough and supports the economic outlook.

View enlarged chart.

2) Driving activity has risen further above pre-pandemic levels. Part of this story is seasonal, but the recovery in driving activity based on map requests from Apple is impressive. People moving around rather than stuck at home is generally good for economic activity, even if many of these map requests are vacation related rather than trips to the store, the office, or a manufacturing facility (few of us need gps to find those places).

View enlarged chart.

3) Restaurant dining resumes its uptrend. It was not particularly surprising to see the number of people eating at restaurants drop in June when cases started to rise in many parts of the West and South. The good news is dining numbers nationally are back on the rise again, a sign that more consumers are increasingly confident that it’s safe to go out. With many restaurants limited to 50% capacity, a 55% year-over-year drop in seated diners with a positive trend is a good sign.

View enlarged chart.

4) Commuting activity is on the rise. More people are heading back to work based on public transit usage in the New York-New Jersey metro area. We observe similar trends in Chicago and Los Angeles. Although the upward trajectory in these statistics have leveled off some recently, this is yet another sign that people are more comfortable getting out and are increasingly supporting the economic recovery.

View enlarged chart.

5) Earnings estimates are rising. The upside surprises during the nearly-complete second quarter earnings season have been very impressive, averaging 22%, even though S&P 500 earnings are tracking toward a more than 30% year-over-year decline for the quarter. Perhaps even more impressive is that earnings estimates for the next 12 months have risen during earnings reporting season, an unusual occurrence. Higher estimates bode well for the earnings outlook and were part of the reason LPL Research increased its 2020 earnings-per-share estimate for the S&P 500 to $125-$130, up from $120-$125.

View enlarged chart.

“The high-frequency data that leveled off early this summer has started to turn higher recently,” said LPL Financial Equity Strategist Jeffrey Buchbinder. “More people getting out as COVID-19 cases have fallen suggests the economic recovery may be picking up a little bit of speed. Maybe the disconnect between the stock market and the economy is not quite as wide as we thought.”
The improvement in jobless claims reported this morning also supports the notion that the recovery is continuing to chug along, although the recovery of lost US output may take another year or two.
For more of our insights into LPL Research’s economic and market outlook, check out our Midyear Outlook 2020: The Trail to Recovery.

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 is a few points away from a new all-time high, completing one of the fastest recoveries from a bear market ever. But this will also seal the deal on the shortest bear market ever. Remember, the S&P 500 Index lost 20% from an all-time high in only 16 trading days back in February and March, so it makes sense that this recovery could be one of the fastest ever.

From the lows on March 23, the S&P 500 has now added more than 50%. Many have been calling this a bear market rally for months, while we have been in the camp this is something more. It’s easy to see why this rally is different based on where it stands versus other bear market rallies:

View enlarged chart.

They say the stock market is the only place where things go on sale, yet everyone runs out of the store screaming. We absolutely saw that back in March and now with stocks near new highs, many have missed this record run. Here we show how stocks have been usually higher a year or two after corrections.

View enlarged chart.

After a historic drop in March, the S&P 500 has closed higher in April, May, June, and July. This rare event has happened only 11 other times, with stocks gaining the final five months of the year a very impressive 10 times. Only 2018 and the nearly 20% collapse in December saw a loss those final five months.

View enlarged chart.

As shown in the LPL Chart of the Day, this bear market will go down as the fastest ever, at just over one month. The recovery back to new highs will be five months if we get there by August 23, making this one of the fastest recoveries ever. Not surprisingly, it usually takes longer for bear markets in a recession to recover; only adding to the impressiveness of this rally.

View enlarged chart.

“It normally takes 30 months for bear markets during a recession to recover their losses, which makes this recovery all the more amazing,” said LPL Financial Chief Market Strateigst Ryan Detrick.. “Then again, there has been nothing normal about this recession, so maybe we shouldn’t be shocked about yet another record going down in 2020.”

For more of our investment insights, check out our latest LPL Market Signals podcast on our 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 are 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

As election season heats up, we are often presented with questions regarding market returns based on the political party composition of the White House and Congress. In our Election Preview Weekly Market Commentary, we took a closer look at equity returns under various political scenarios. Here we provide the data for the other side of a standard asset allocation by investigating bond returns under various congressional makeups.

Using the 10-year Treasury bond as a proxy, we pulled the data going back to 1951, as the major bond indices do not have as long of a track record. While equity markets encounter greater volatility from corporate earnings, Treasury markets are largely driven by changes in interest rates. As shown in the LPL Chart of the Day, there does not appear to be as clear of a relationship between congressional makeup and Treasury returns as we saw for equity markets:

View enlarged chart.

While returns for the 10-year Treasury under a Republican president and a split Congress appear to be much better than other combinations, it is important to remember that Treasury yields reached their all-time peak at nearly 16% just before the beginning of Ronald Reagan’s first term. The yield on the 10-year eventually fell around 7% by the end of his second term, causing the returns under his administration to greatly skew the data.

With the 10-year Treasury yield currently trading just above 0.6%, it would seem unlikely that Treasury yields will ever return to the levels seen in the 1980s. However, despite low yields, 2020 has shown that the “safe haven” appeal of Treasuries can play an important role in client portfolios to limit volatility.

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 10-year Treasury yield is historically low, so low that it could climb a full 1% before the end of the year and still be the lowest year-end yield on record, with room to spare. Historically low rates come with a genuine concern that they can reverse and climb higher, which could be painful for Treasury investors. The good news: As shown in LPL’s chart of the day, four out of five of the worst years for estimated 10-year Treasury returns have been mid- to late cycle, which is not the stage that we’re in now.

“What pushes up Treasury yields? Growth, inflation, or the Fed,” said LPL Chief Market Strategist Ryan Detrick. “But what do we have? Growth, sure, but inflation looks tame and the Fed has signaled they may be on hold for a while.”

Looking at the five worst years of estimated 10-year Treasury performance, there’s an interesting mix of drivers. There’s a period of high (and rising) inflation (1969) when the Fed was raising rates, hurting stock returns. There are two cases of the Fed pumping the breaks during a strong period of growth (1994, 1999). There’s the “taper tantrum” in 2013, when the Fed was just talking about winding down quantitative easing while remaining supportive, but it was still all about the Fed. And then there’s the outlier: 2009.

View enlarged chart.

If you looked at the economic data for every year since 1950, including what the Fed was up to, I don’t think you would pick out 2009 as a year when yields jumped, nevermind the worst period for Treasuries. The stock market rebounded, probably before many expected, as the economy starrted to recover from a difficult recession, although it wasn’t clear what kind of recovery we would have and there were still many who thought the market rebound was a head fake. The Fed continued to surprise markets by doing things it had just never done before. A massive stimulus bill was signed into law in February. The dollar started to fall. Gold prices started climbing steadily (and would continue to climb until 2011). TIPS yields were diverging from the 10-year Treasury. It’s all eerily similar to signals we’re seeing now—except the 10-year Treasury yield has just been flat.

Despite the similarities, we think a rate surge now is much less likely. The Fed’s commitment to keeping rates low for an extended period of time is stronger; we know now that central bank asset purchases don’t necessarily lead to inflation, and low international yields continue to make Treasuries attractive, even if less so than a year ago.

But despite not seeing a lot of room for rates to rise, we remain cautious on Treasuries. As interest rates fall, bond prices become even more sensitive to rate changes and aren’t generating as much income to offset losses. It’s not surprising to see only one year prior to 1990 make it into the five. Treasuries historically have been the best diversifiers for stock holdings during periods of market declines and that diversification still has value, but with yields low they have never come with more risk as right now.

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 isn’t like any recession we’ve ever seen, as it was sparked by a horrible pandemic and happened because people were told to stay inside. The impact was the worst contraction in gross domestic product (GDP) last quarter that anyone who is reading this has ever seen. But what is quite surprising is the fact the Nasdaq has made 30 all-time highs so far in 2020, while the S&P 500 Index has gained four consecutive months, all while the unemployment rate remains above 10%.

Why is this happening? There are two main schools of thought. One is that stocks are forecasting a better economy later this year and into 2021; remember, stocks tend to lead the economy and could be doing so once again. Another school of thought is that the massive fiscal and monetary policy are boosting equity prices, while not helping the overall economy quite as much.

Here’s the catch. It actually isn’t abnormal to see stocks gain during a recession. “This is one that might surprise many people, but stocks have actually gained during 7 of the past 12 recessions,” explained LPL Financial Chief Market Strategist Ryan Detrick. “There’s no question the difference between what is happening on Wall Street compared with Main Street is about as wide as we’ve ever seen, but maybe it shouldn’t be as big of a surprise that stocks have been strong.”

As shown in the LPL Chart of the Day, the S&P 500 actually gained 1.3% on average when looking at the 12 previous recessions going back to World War II, with a very impressive median advance of 5.7% (the average is skewed lower due to 2008). We continue to expect this recession to end soon, if it isn’t over already. In fact, when the end of the recession is officially declared at a later date, we could have yet another recession that saw stock market gains.

View enlarged chart.

For more of our investment insights and thoughts on this recession, check out our latest LPL Market Signals podcast.

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