Weekly Market Commentary

10/10/22 POCKETS OF VULNERABILITIES

Quincy Krosby, Ph.D. Chief Global Strategist, LPL Financial
George Smith, CFA, CAIA, CIPM, Portfolio Strategist, LPL Financial 

As Federal Reserve (Fed) officials continue to emphasize the Fed’s commitment towards restoring price stability, the dollar marches ever higher. Markets are currently pricing in another 75-basis point rate hike at the November 2 Fed meeting as calls for the Fed to halt its aggressive campaign are mounting. Worries persist that tightening financial conditions, underpinned by a stronger dollar, will lead to deeper cracks within the global financial system. 

Weekly Market Commentary

10/3/22 MARKETS ON WATCH AS XI JINPING’S INFLUENCE TO BE TESTED IN OCTOBER

Quincy Krosby, Ph.D., Chief Global Strategist, LPL Financial 

On October 16, China will begin its 20th National Congress of the Chinese Communist Party in Beijing. This plenum is especially significant because it is expected that President Xi Jinping will be granted an unprecedented third term, something that he set in motion in 2018 when term limits were abolished. 

Weekly Market Commentary

9/26/22 TAKING ADVANTAGE OF HIGHER YIELDS

Lawrence Gillum, CFA, Fixed Income Strategist, LPL Financial
Josh Whitmore, CFA, Sr. Fixed Income Analyst, LPL Financial 

The LPL Research Strategic and Tactical Asset Allocation Committee is increasing its recommended interest rate exposure in its tactical allocation from underweight to neutral. Now that interest rates have moved substantially higher, we believe opportunities in fixed income have improved and are looking to add back to certain areas within fixed income that may benefit. 

Weekly Market Commentary

9/19/22 HOW MUCH HIGHER CAN RATES GO?

Lawrence Gillum, CFA, Fixed Income Strategist, LPL Financial 

Inflationary dynamics continue to surprise to the upside, and markets now expect the Fed to pursue one of its most aggressive rate hiking campaign in years. U.S. Treasury yields continue to move higher as well. We think we’ve seen the biggest moves higher in yields, but as long as inflationary pressures continue to surprise to the upside, interest rate volatility will likely remain. We still think the 10-year Treasury yield can end the year between 2.75%-3.25%, but we acknowledge there are risks to the upside. 

Weekly Market Commentary

9/12/22 GETTING JOBS MARKET BACK INTO BALANCE

Jeffrey Roach, PhD, Chief Economist, LPL Financial 

Federal Reserve Chairman Jay Powell reiterated his warning that getting inflation under control will require some pain. Powell is likely making these warnings based on the arcane, clunky relationship between inflation and unemployment. The key to getting the market back into balance is a bigger labor force, and the economy is starting to experience a larger labor force as individuals come off the sidelines and rejoin the job market. 

Weekly Market Commentary

9/6/22 CALENDAR CRUELTY

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

The difficult 2022 for stocks may not get much easier because as we now wait for better news on the inflation front, we have to contend with a seasonally weak month of September. While we got some welcome news in Friday’s jobs report, more evidence of falling inflation will take time to materialize. The good news is a seasonally strong fourth quarter is right around the corner. If history is a guide, midterm elections may provide an added late-year boost. 

Weekly Market Commentary

8/29/22 EARNINGS RECAP: STILL HANGING IN THERE

Jeffrey Buchbinder, CFA, Chief Equity Strategist, LPL Financial 

Earnings growth of 6-7% doesn’t sound very exciting, but given the challenges corporate America has faced, we consider the nearly-complete second quarter earnings season a resounding success. The numerous challenges last quarter included a slowing economy, intensifying inflation pressures, ongoing global supply chain disruptions, and a surging U.S. dollar. Still, corporate America delivered the type of upside investors have grown accustomed to in much easier economic environments. 

Weekly Market Commentary

8/22/22 WHERE WILL HOUSING GO FROM HERE?

Jeffrey Roach, PhD, Chief Economist, LPL Financial
Marc Zabicki, CFA, Chief Investment Officer and Director of Research, LPL Financial 

Existing home sales fell 5.9% in July, the sixth consecutive month of declines as higher interest rates weigh on housing affordability and prospective buyers. As the housing market slowed, so did prices. The median price for a single family home was $410,600, a decline of roughly $10,000 from June. However, homes do not stay on the market long. Over the last two months, homes were on the market for an average of only 14 days, three days shorter than a year ago. 

Weekly Market Commentary

8/15/22 START OF A NEW BULL MARKET?

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

Investors cheered the two better-than-expected inflation reports last week, pushing the S&P 500 to 16% above its June 16 low and only 11% below its all-time high. After this rebound, the key question investors are asking is whether this is a bear market rally that will soon fizzle or the start of a new bull market. There’s too much uncertainty to have a high conviction view right now, but we do believe the odds have risen that a new bull market has begun. 

Weekly Market Commentary

8/8/22 CASE FOR RECESSION WEAKENS

Jeffrey Buchbinder, CFA, Chief Equity Strategist, LPL Financial
Jeffrey Roach, PhD, Chief Economist, LPL Financial 

The market pundits remain intensely focused on the question of whether the U.S. economy is in or about to enter recession, so we thought a piece on what a recession might mean for the stock market would be of interest. While Friday’s strong jobs report provides more evidence that the U.S. economy is not currently in recession, odds are still perhaps a coin flip or better that one may come in the next year. We update changing recession prospects and what that might mean for stocks. 

Weekly Market Commentary

8/1/22 WHAT A WEEK

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

That was quite a week. These days a Federal Reserve (Fed) policy meeting alone gets a lot of headlines and has market participants on the edge of their seats. Add to that the second straight quarter of negative gross domestic product (GDP) growth that exacerbated recession fears, the busiest week of earnings season, and important but sometimes under-the-radar inflation data, and last week was epic for market watchers. Here’s the good news: Markets liked it. 

Weekly Market Commentary

7/25/22 THREE FACTORS THAT COULD CHANGE THE COURSE OF INFLATION

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

For the past year, supply-related problems contributed more to inflation than demand-related imbalances, but that may be changing soon. There are at least three factors that could change the course of inflation. First, the improvement in shipping and general supply bottlenecks could ease inflation. Second, strength in the U.S. dollar could offset some of the current inflationary pressures. And third, import prices have moderated since the beginning of 2022 and as import prices slow, we expect consumer prices to eventually reflect the slowdown in import prices. 

Weekly Market Commentary

7/18/22 Managing Volatility

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

Markets rarely give us clear skies, and there are always threats to watch for on the horizon, but the right preparation, context, and support can help us navigate anything that may lie ahead. So far, thisy ear hasn’t seen a full-blown crisis like 2008–2009 or 2020, but the ride has been very bumpy. We may not be flying into a storm, but there’s been plenty of volatility the first part of 2022. How businesses, households, and central banks steer through the rough air will set the tone for markets over the second half of 2022.

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.