Weekly Market Commentary

4/25/22 BUSINESSES AND CONSUMERS LIKELY PROTECTED FROM NEAR-TERM RECESSION

Jeffrey J. Roach, PhD, Chief Economist, LPL Financial
Lawrence Gillum, CFA, Fixed Income Strategist, LPL Financial 

Not all recessions are created equal. Previous downturns in the U.S. were prompted by various shocks, with the most recent recession started by health and government-induced shutdowns. Other recessions started in the corporate sector, whereas some started from commodity shocks. The next one could start from geopolitical tensions. Nonetheless, we think the current business and consumer environments are safe from near-term recession risks. 

Happy Earth Day

Tomorrow the world will mark the 52nd Earth Day. This year’s theme will be Invest in Our Planet. Earthday.org has many ideas for ways to get involved, including their 52 Ways to Invest in Our Planet (https://www.earthday.org/earth-day-tips/).

From an investment perspective, it represents a chance for investors to align their portfolios to benefit from a more sustainable economy while helping drive positive change:

 Addressing Climate Change Risks in your Investment Portfolio

 In related regulatory news, on March 21, the SEC proposed new rules to enhance and standardized climate-related disclosures (https://www.sec.gov/news/press-release/2022-46). 

Leslie Samuelrich, a guest speaker on our Q1 2022 SI Study Group Talk, had a nice write-up on the impact to investors (https://www.greencentury.com/statement-green-century-responds-to-proposed-sec-climate-risk-disclosure-rules/).

 Enjoy the Earth!

-King Wealth Planning

Weekly Market Commentary

4/18/22 WHAT TO WATCH THIS EARNINGS SEASON

Jeff Buchbinder, CFA, Equity Strategist, LPL Financial
Ryan Detrick, CMT, Chief Market Strategist, LPL Financial 

First quarter earnings season is rolling. BlackRock, Delta Airlines, Goldman Sachs, JPMorgan Chase, and Morgan Stanley were among the first 16 S&P 500 companies to report March quarter results, following 20 index constituents with quarters ending in February that had already reported. This week we preview earnings season, highlight what we are watching, and share our latest thoughts on the 2022 profit outlook. 

Weekly Market Commentary

4/11/22 HEADWINDS TO GLOBAL GROWTH

Jeffrey Roach, PhD, Chief Economist, LPL Financial
Lawrence Gillum, CFA, Fixed Income Strategist, LPL Financial 

LPL Research reduced U.S. and global GDP forecasts due to Russian commodity disruptions, elevated inflation dynamics, and higher borrowing costs. Still, we expect the U.S. economy to grow 2.7-3.2% in 2022, supported by business investment and consumer services spending in the latter half of this year. Forecasts for GDP growth in developed economies excluding the U.S. and emerging markets were also reduced this month to 2.5–3% and 3.8–4.3% respectively, bringing the LPL Research global GDP growth forecast down about one percentage point to 3–3.5%. 

Weekly Market Commentary

4/4/22 OUR STOCK MARKET FINAL FOUR

Jeff Buchbinder, CFA, Equity Strategist, LPL Financial
Jeffrey Roach, PhD, Chief Economist, LPL Financial
Lawrence Gillum, CFA, Fixed Income Strategist, LPL Financial 

As the Final Four NCAA Basketball Tournament rolls on in New Orleans, we continue our tradition of picking a stock market final four. We have identified our four key factors for the stock market outlook: 1) Consumer spending, 2) Earnings, 3) Interest rates, and 4) Inflation. We also celebrate last year’s winner: COVID-19 vaccines. We discuss these four factors, how they may influence markets this year, and pick our winner.

Weekly Market Commentary

3/28/22 TEMPERING OUR ENTHUSIASM

Jeff Buchbinder, CFA, Equity Strategist, LPL Financial
Ryan Detrick, CMT, Chief Market Strategist, LPL Financial 

As the stock market recovered from the 2020 pandemic lows, valuations reached levels not seen since the dotcom bubble more than 20 years ago. The reopening economy and massive fiscal stimulus helped fuel one of the strongest starts to a bull market ever (a bull market that just turned two-years-old last week). Low interest rates were a big part of the story. But just as low interest rates helped support stock valuations, that relationship can go in reverse as we’ve witnessed recently. 

Weekly Market Commentary

3/21/22 IN DEFENSE OF CORE BONDS

Lawrence Gillum, CFA, Fixed Income Strategist, LPL Financial
Ryan Detrick, CMT, Chief Market Strategist, LPL Financial 

Core bond investors have experienced one of the worst starts to the year ever, potentially calling into question the validity of bonds in a portfolio. Despite the poor start, we don’t think the value proposition for bonds has changed much. Moreover, with yields on most fixed income markets moving sharply higher, now could be a good time to revisit fixed income markets. Starting yields are still the best expectation of future returns and have become more attractive in a number of markets recently. 

Weekly Market Commentary

3/14/22 READY, SET, HIKE

Lawrence Gillum, CFA, Fixed Income Strategist, LPL Financial
Ryan Detrick, CMT, Chief Market Strategist, LPL Financial 

The Federal Reserve (Fed) meets this week and in all likelihood will raise short-term interest rates for the first time since emergency levels of monetary accommodation were provided to markets after the COVID-19 shutdowns. Inflationary pressures are running higher than the central bankers are comfortable with, but the conflict in Eastern Europe adds to the uncertain path of policy normalization. Prospects of yield curve inversion make the Fed’s job trickier. 

Weekly Market Commentary

3/7/22 DOWNSHIFT IN U.S. GROWTH BUT STILL ABOVE TREND

Jeffrey Roach, PhD, Chief Economist, LPL Financial 

We currently expect the U.S. economy to grow 3.7% in 2022. The risks are to the downside since the Fed may err on tightening too fast, the recent commodity spike may trickle down to the U.S. consumer, and supply and demand imbalances may last longer than expected. This forecast is lowered from our previous 4-4.5% range originally published in Outlook 2022: Passing the Baton. The rest of this commentary explains the overall themes supporting the forecast. 

Weekly Market Commentary

2/28/22 HOW SOON ARE RATE HIKES COMING?

Lawrence Gillum, CFA, Fixed Income Strategist, LPL Financial
Ryan Detrick, CMT, Chief Market Strategist, LPL Financial 

With inflationary pressures running higher than many central bankers are comfortable with, calls for interest rate hikes have become louder. A number of important central bank meetings are set to take place in March including the Federal Reserve, European Central Bank, Bank of Canada, Bank of England, and the Reserve Bank of Australia, to name a few. As such, March could be an important month for monetary policy shifts. 

Weekly Market Commentary

2/22/22 STRONG EARNINGS MOMENTUM TO START 2022

Jeff Buchbinder, CFA, Chief Equity Strategist, LPL Financial
Ryan Detrick, CMT, Chief Market Strategist, LPL Financial 

Corporate America has capped off an outstanding 2021 with an excellent fourth quarter earnings season so far. Entering 2021, the consensus estimate for S&P 500 Index earnings per share (EPS) was less than $170. Now with fourth quarter results mostly in the books, that number is 22% higher at $208. We recap another solid fourth quarter earnings season and discuss what the results could mean for earnings growth and stock market performance in 2022. 

Weekly Market Commentary

2/14/22  THE VALENTINE’S DAY INDEX

Ryan Detrick, CMT, Chief Market Strategist, LPL Financial
Barry Gilbert, PhD, CFA, Asset Allocation Strategist, LPL Financial 

High inflation continues to cloud the economic outlook while its impact on the potential path of rate hikes has left markets unsettled. Inflation is a serious topic, but occasionally it’s useful to revisit it from a lighter perspective. As we do every year, LPL Research takes a look at changing prices from the perspective of some popular ways to celebrate the day with our annual Valentine’s Day Index. Do you want to know what you might be paying this year for a night in, a night out, a special piece of jewelry, or even a vacation? LPL Research has you covered. 

Weekly Market Commentary

2/7/22 WHICH REGION WILL GET THE GOLD IN 2022? 

Jeff Buchbinder, CFA, Equity Strategist, LPL Financial
Ryan Detrick, CMT, Chief Market Strategist, LPL Financial
Scott Brown, CMT, Technical Market Strategist, LPL Financial 

The near-10% correction in the S&P 500 Index and even larger drawdown in the Nasdaq have gotten a lot of attention this year. What hasn’t gotten as much attention—and maybe surprising to some—is the relative resilience in equity markets outside the U.S. In our special Winter Olympics edition of the Weekly Market Commentary, we hand out medals to the U.S., developed international, and emerging markets. Who do we think will get the gold? 

Weekly Market Commentary

1/31/22 SUSTAINABLE INVESTING YEAR IN REVIEW

Jason Hoody, CFA, Head of Investment Manager Research & Sustainable Investing Research, LPL Financial 

Sustainable investing hit several milestones in 2021, but continued to attract its critics. Below we look at how sustainable investing fits within the broader concept of sustainability, its growth during 2021, and an implementation framework that has been helpful for many. A well diversified sustainable investing portfolio doesn’t mean that an investor has to make a choice between achieving market-like returns and being an aware social and environmental steward. 

Weekly Market Commentary

1/24/22 POTENTIAL CATALYSTS FOR A TURNAROUND

Jeff Buchbinder, CFA, Equity Strategist, LPL Financial
Ryan Detrick, CMT, Chief Market Strategist, LPL Financial 

After a tough start for stocks in 2022, investors are looking for reasons to expect a rebound. After more than doubling off the pandemic lows in March 2020, without anything more than a 5% pullback in 2021, stocks probably needed a break. That doesn’t, however, make this dip feel much more comfortable. In this commentary, we cite some reasons we don’t expect this selloff to go a lot further, though a 10% drawdown in the S&P 500 seems reasonable to expect. 

Weekly Market Commentary

1/18/22 DON’T EXPECT THE FED TO END THIS BULL ANYTIME SOON

Jeff Buchbinder, CFA, Equity Strategist, LPL Financial
Ryan Detrick, CMT, Chief Market Strategist, LPL Financial 

 The Federal Reserve (Fed) has engineered a massive hawkish shift, causing a bit more stock market volatility recently. But how worried should investors be? Here we take a look back at historical performance for stocks before, after, and much after initial Fed rate hikes to help reassure any nervous investors out there. We also take a quick look at what the Fed pivot could mean for growth/value and large cap/small cap trends given the maturing business cycle. 

Weekly Market Commentary

1/10/22 CAN CORPORATE AMERICA KEEP IT ROLLING?

Jeff Buchbinder, CFA, Chief Equity Strategist, LPL Financial
Ryan Detrick, CMT, Chief Market Strategist, LPL Financial 

Corporate America has been on quite a run. Coming into 2021, S&P 500 Index companies were expected to generate less than $170 in earnings per share. As 2022 begins, it looks like that number may end up higher than the latest LPL Research estimate of $205, one of the biggest earnings upside surprises ever and a big reason why stocks did so well last year. But 2021 earnings are not yet fully in the books. We have one more quarter to go, which we preview in this week’s commentary. 

Weekly Market Commentary

1/3/2022 THREE 2021 MARKET LESSONS FOR 2022

Barry Gilbert, PhD, CFA, Asset Allocation Strategist, LPL Financial
Ryan Detrick, CMT, Chief Market Strategist, LPL Financial
Jeffrey Buchbinder, CFA, Equity Strategist, LPL Financial Lawrence Gillum, CFA, Fixed Income Strategist, LPL Financial 

In many ways, 2021 was a typical year for markets, but it also reinforced some basic market lessons that are hard to learn, even if they are not new. As we launch into the New Year, we’re highlighting three 2021 market lessons that we think may matter for 2022: 1) equity valuations are a poor timing mechanism, 2) structural forces have a large influence on interest rates and may keep them relatively low, and 3) politics and markets don’t mix. 

Weekly Market Commentary

12/27/21 HOW MUCH HIGHER CAN TREASURY YIELDS GO?

Lawrence Gillum, CFA, Fixed Income Strategist, LPL Financial
Ryan Detrick, CMT, Chief Market Strategist, LPL Financial

We expect interest rates to move modestly higher in 2022 based on near-term inflation expectations above historical trends and improving growth expectations once the impact of COVID-19 variants recede. Our year-end 2022 forecast for the 10-year Treasury yield is 1.75–2.00%. An aging global demographic that needs income, higher global debt levels, and an ongoing bull market in equities may keep interest rates from going much higher.

Weekly Market Commentary

12/13/21 Economic Outlook 2022

Ryan Detrick, CMT, Chief Market Strategist, LPL Financial
Barry Gilbert, PhD, CFA, Asset Allocation Strategist, LPL Financial

We believe pent-up demand, gradual improvement in supply chain challenges, solid labor force
growth, and productivity gains will all contribute to another year of above-trend economic growth in
2022. COVID-19-related risks remain and the potential for a policy mistake may be elevated as the
economy moves towards normalization, but we think the overall environment will be supportive of
business growth and ultimately equity markets.