Weekly Market Commentary

September 25th, 2023 | LPL Research
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An impressive growth story has propelled India into a major powerhouse across the global economic landscape. Over the last two decades, the country has made impressive strides in reshaping its economy by leveraging its growing population and improving its outdated infrastructure. At the core of the growth story is the largest consumer base in the world based on its population size of nearly 1.5 billion people, according to United Nations (UN) estimates.

September 18th, 2023 | LPL Research
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The US Dollar Index is up more than 5% off its recent July 14 low, an impressive recovery after a double-digit decline from the September 2022 highs. Dollar strength reflects the stronger-than-expected U.S. economy, higher-for-longer monetary policy from the Fed, as well as euro weakness related to its slumping economy, all of which have contributed to the U.S. reasserting itself as a more attractive investment destination.

August 28th, 2023 | LPL Research
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For years, economists have said the neutral rate is close to 0.5% or 2.5% after adjusting for inflation. Now, however, there are some central bank officials and economists who estimate the neutral rate to be higher, perhaps as high as 1.5% (or 3.5% adjusted for inflation).  If the neutral rate is indeed higher, then that has implications for the economy as well as the bond market. Historically, when the Fed took the fed funds rate into restrictive territory, things broke (as described above). However, despite over 5% of rate hikes to seemingly very restrictive territory, things aren’t breaking, which may confirm the neutral rate is indeed higher than it has been in the recent history.

August 14th, 2023 | LPL Research
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On August 1, one of the three main credit rating agencies, Fitch, downgraded U.S. government debt to its second-highest rating, AA+. The agency cited “the expected fiscal deterioration over the next three years, a high and growing general debt burden, and the erosion of governance relative to ‘AA’ and ‘AAA’ rated peers over the last two decades” as reasons for the downgrade.

July 31st, 2023 | LPL Research
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As the economy searches for stability, we think the inflation dynamic will continue to improve throughout the year as the economy slows and the Fed pauses. Despite some concern about the difficulty of achieving a 2% inflation target, inflation is approaching the Fed’s long-run target.

July 24th, 2023 | LPL Research
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Treasury yields have been relatively volatile over the last several weeks as speculation intensifies over the Fed’s next monetary policy moves. Signs of labor market strength in the June ADP report drove rate hike expectations higher and two-year Treasury yields back to their March highs at 5.08% earlier this month.

July 17th, 2023 | LPL Research
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Earnings season is upon us as some banks and a small handful of other blue chip companies have already reported results for their quarters ending June 30. The results on the surface probably won’t offer much to write home about given consensus estimates imply a 7% year-over-year decline in S&P 500 earnings per share. 

July 3rd, 2023 | LPL Research
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Following nearly 18 months of being virtually dormant, IPOs are beginning to emerge with successful results. With economic data continuing to suggest the U.S. economy remains on solid footing, and expectations the Fed is close to completing its rate hiking campaign, bankers are hopeful they can begin taking a growing pipeline of companies public.

June 12th, 2023 | LPL Research
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As the Fed assesses the strength of the economy, consumers continue to spend, but more deliberately. If the labor markets weaken and the unemployment rate climbs materially higher, consumer spending should slow meaningfully. Representing nearly 68% of GDP, consumers have accepted higher prices from a broad range of companies, but if unemployment rises to levels reflecting recessionary conditions, spending would likely slow dramatically.

June 20th, 2023 | LPL Research
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The housing sector is currently a significant factor impacting inflation in 2023. Shelter costs, which hold a significant weight in the CPI, are expected to ease. There is evidence rent costs will eventually decrease, as can be seen in the robust multi-family construction activity. As more projects hit the market this year due to the increase in condo and apartment units under construction, the supply of multi-family housing will rise, which should help bring down rent prices.

May 30th, 2023 | LPL Research
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Last year’s headwinds of higher rates underpinned by aggressive Federal Reserve (Fed) tightening have finally abated. Interest rate stabilization, signs of receding inflation, and a potential peak in the terminal rate by this summer have helped bring buyers back into the space. 

May 23rd, 2023 | LPL Research
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Economists like to remind us there is no such thing as a free lunch. In investment parlance, that just means all investments carry risk—even cash. And the big risk with cash is reinvestment risk. That is, while short-term rates are currently elevated, the risk is these rates won’t last and upon maturity, investors will have to reinvest proceeds at lower rates.

May 15th, 2023 | LPL Research
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At year end, we expect the inflation outlook to look much better, enabling market participants to look through the economic malaise and toward recovery in 2024—hopefully with the debt ceiling and regional bank issues fully put to rest.

May 1st, 2023 | LPL Research
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“Sell in May and go away” is the seasonal stock market pattern in which stocks generally produce the best returns from November through April and the worst returns from May through October. This pattern has been strong enough—and the adage popular enough—that it has probably been somewhat of a self-fulfilling prophecy over many years.

April 24th, 2023 | LPL Research
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Small businesses have an incredible impact on both the national and local economy. Small businesses make up the majority of all businesses by count, while also employing over 46% of the private sector workforce.¹ It’s not a stretch to say “as goes the small and independent business, so goes the national economy.”

April 17th, 2023 | LPL Research
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While the market has clearly priced in a lot of negativity for office REITs, the upward trajectory of vacancy rates implies there could be more downside risk ahead. Furthermore, higher frequency data shows there is still a long way to go for office occupancy rates to normalize back to pre-pandemic levels—an unlikely event given the proliferation of work from home policies across corporate America.

April 10th, 2023 | LPL Research
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Corporate America faces some of the same headwinds it did during fourth quarter earnings season, including slow global economic growth, cost pressures from still-elevated (but easing) inflation, some currency drag from a stronger U.S. dollar last quarter compared with the year-ago quarter, and geopolitical instability, particularly in Eastern Europe and China, that has put some upward pressure on costs.

April 3rd, 2023 | LPL Research
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Changing Fed rate hike expectations can be seen clearly in the elevated levels of volatility in the normally staid U.S. Treasury market. The 2-year Treasury yield, which is most sensitive to policy expectations, saw daily moves of plus or minus 0.20% during the banking crisis. 

March 27th, 2023 | LPL Research
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The collapse of SVB, followed by the other banks that were victims of the immediate panic that ensued, is emblematic of the changing landscape. 

March 21st, 2023 | LPL Research
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Volatility in Treasuries has been rising since the start of 2021 when the bond markets started sniffing out that the Fed may need to take action to tackle rising inflation and has been extremely elevated since the start of 2022.

March 13th, 2023 | LPL Research
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Growth stocks have come storming back in 2023 after significantly underperforming their value counterparts in 2022. The Russell 1000 Growth Index has returned 4.6% year to date, compared to the 2.3% decline for the value index. 

February 27th, 2023 | LPL Research
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The government uses a combination of revenue, mostly through taxes, and additional borrowing to pay its current bills—including Social Security, Medicare, and military salaries—as well as the interest and principal on outstanding debt. If the debt ceiling isn’t raised, the government will not meet all its current obligations and could default.

February 13th, 2023 | LPL Research
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Good market forecasts are not just about the economy and earnings—they are about what the market is pricing in.

February 6th, 2023 | LPL Research
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Earnings are, of course, the bottom line, so when looking at an equity investment we certainly can’t ignore earnings. The U.S. has been the clear earnings leader relative to international for the past decade, but the tide has recently turned. 

January 30th, 2023 | LPL Research
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The script has been flipped in 2023. Last year’s underperformers have turned into outperformers this year, driving the S&P 500 Index up over 5% this month. The pace and composition of the rally have left many investors skeptical over its sustainability, especially amid a lackluster earnings season thus far.

September 30, 2022 | LPL Research
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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. 

September 29 | LPL Research
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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.