Weekly Market Commentary

7/5/22 CONSTRUCTIVE, NOT COMPLACENT: LOWERING S&P 500 TARGET

Jeffrey Buchbinder, CFA, Equity Strategist, LPL Financial
Jeffrey Roach, PhD, Chief Economist, LPL Financial
George Smith, CFA, CAIA, CIPM, Portfolio Strategist, LPL Financial 

Stocks have been unable to make up much ground since the June 16 lows, with a bear market rally amounting to only around a 4.3% gain in the S&P 500 Index since then (as of July 1). After the more than 6% rally the week of June 24 and the increasing optimism that came with that bounce, stocks pulled back again last week—the 11th down week for the index in the past 13 weeks. While we acknowledge that a V-shaped recovery is probably not in the cards and prior valuation targets no longer appear achievable, we remain constructive on equities for the second half, but not complacent. 

Weekly Market Commentary

6/27/22 RELIEF AT THE PUMP AND FOR PORTFOLIOS?

Scott Brown, CMT, Technical Market Strategist, LPL Financial
Quincy Krosby, Chief Equity Strategist, LPL Financial 

2022 has been rough all-around for the American consumer. Not only are we battling decades-high inflation, but investors’ portfolios are off to one of the worst starts to a year in history as we near the halfway point. Our technical work is first and foremost rooted in trend following, and the trend in both stock and bond prices so far this year have of course been down. However, one trend that has been strongly higher is energy prices. It may be early, but we see some potential signs that energy trends could be changing, which would not only have positive implications for consumers’ wallets, but also potentially investors’ investment portfolios. 

Weekly Market Commentary

6/21/22 BEAR MARKET Q&A

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

The bear market that started on June 13 has left the S&P 500 Index 23.5% below its January 3 high. After the initial positive reaction to the Federal Reserve’s first 0.75% rate hike since 1994 and tough talk on inflation, heightened fears of recession and that the Fed might “break something” sent stocks down for the 10th week out of 11 for only the second time in history (The first was in 1970). To help investors manage through this difficult period, we answer some of the top questions we’re getting about bear markets and list some things to watch to assess progress toward an eventual durable low. 

Weekly Market Commentary

6/13/22 IS THE 60/40 PORTFOLIO DEAD?

Barry Gilbert, PhD, CFA, Asset Allocation Strategist, LPL Financial
Jeffrey Buchbinder, CFA, Equity Strategist, LPL Financial 

This year has been tough for investors, not just because stocks have fallen but also because bonds have not helped mitigate those losses as they have historically done. We discuss the outlook for diversified portfolios of stocks and bonds to make the case that the 60/40 portfolio isn’t dead. It may have been wounded this year, and took another blow on Friday after the hotter-than-expected inflation data, but we believe the losses in stocks and bonds this year increase the chances of positive outcomes going forward. Long-term investors take note. 

Market Insights

6/9/22 Market Insights From the Financial Services Network

THE DOLLAR IS TOO STRONG. If you’re planning a trip abroad to the U.K. this summer, you may be in for a happy surprise. One British Pound Sterling currently converts to $1.22, a historically favorable exchange rate. Except for a brief period in early 2020, the last time the Pound traded this low against the dollar was in 2016; before that, the Pound briefly traded as low as $1.08 in 1985 when Reagan was President, the U.S. economy was coming out of recession, and the Fed funds rate hovered between 8-9%. (See Chart 1 below.) Measured against six other major currencies, the U.S. Dollar Index is at its highest level in nearly 20 years.

Weekly Market Commentary

6/6/22 ECONOMY SLOWING BUT NOT SHRINKING

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

Many pundits are issuing recession warnings and saying the economy is heading for a hard landing. Amid the cacophony of voices, we think the economy is slowing just like central bankers want but not shrinking. Further, we argue that a slowing economy is very different than a shrinking one. 

Weekly Market Commentary

5/31/22 LOOKING THROUGH THE CLOUDS

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

At the risk of sounding cliché, making the case for stocks to stage a second half rally back to the prior highs requires investors to see through some heavy cloud cover. If you prefer another market cliché, it’s times like these when investors need a crystal ball. We fully acknowledge how tough it is to see the bull case for stocks right now, and a retest of recent lows is certainly possible, but this week we lay out the bull case for the second half of the year. It starts with inflation. 

Weekly Market Commentary

5/23/22 DAWN OF A NEW ERA FOR BONDS

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

Core bond investors have experienced the worst start to the year ever. However tough this year has been so far though (and it has been tough), the potential for future returns has improved meaningfully, in our view. Starting yields tend to be a good predictor of future returns and have become more attractive in a number of markets recently. With yields on most fixed income markets moving sharply higher, now could be a good time to revisit fixed income markets. 

Weekly Market Commentary

5/16/22 CORPORATE AMERICA DELIVERS, MARKET ATTENTION FOCUSED ELSEWHERE

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

First quarter earnings season was solid by just about any measure, but based on recent market behavior it’s obvious that in general market participants paid little attention. This is a macro-driven market, so it will likely take positive macro developments, i.e., better news on the inflation front, to turn stocks around. However, these results are impressive on their own and shouldn’t hurt the case for the bulls. The question is, when will the micro stop getting drowned out by the macro?

Weekly Market Commentary

5/9/22 HAVE WE REALLY SEEN EXTREME PESSIMISM YET?

George Smith, CFA, CAIA, CIPM, Quantitative Strategist, LPL Financial
Scott Brown, CMT, Technical Market Strategist, LPL Financial
Ryan Detrick, CMT, Chief Market Strategist, LPL Financial 

It’s been a very tough start to the year with both stocks and bonds down sharply. Adding to the “wall of worry” for investors are the highest levels of U.S. inflation in decades, an aggressive Federal Reserve (Fed), Chinese lockdowns, and continuing war in Europe. So perhaps it is no surprise that investor sentiment polls are showing signs of extreme pessimism. Extremes in sentiment tend to be contrarian indicators for the stock market over the short-to-medium-term, but have we really seen extreme pessimism yet? We look at some of the latest investor sentiment data and share our thoughts about the disparity between what investors are saying and what they are actually doing. 

Weekly Market Commentary

5/2/22 WHY YOU SHOULDN’T SELL IN MAY THIS YEAR

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

“Sell in May and go away” is probably the most widely cited stock market cliché in history. Every year a barrage of Wall Street commentaries, media stories, and investor questions flood in about the popular stock market adage. In this week’s Weekly Market Commentary, we tackle this commonly cited seasonal pattern and why it might not play out this year, similar to recent years. 

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.