Weekly Market Commentary
Each week the LPL Financial Research team assembles thoughtful insight on market news.
January 30, 2023 | LPL Research
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. Of course, the market is also forward-looking, with expectations for falling inflation and a less hawkish Federal Reserve (Fed) as we progress into 2023.
January 23, 2023 | LPL Research
The latest episode of the debate between stock market bulls and bears has gotten more interesting. For every valid point from one side, there’s an equally compelling argument on the other side. Perhaps the best reason for the debate is the uniqueness of this environment. The pandemic and its aftermath don’t come with a historical playbook. We haven’t been here before. So we’ll just recognize that the outlook is uncertain, weigh the pros and cons, glean what we can from the past, and give it our best shot. Call us cautious bulls.
January 17, 2023 | LPL Research
Fourth quarter earnings season is underway and probably won’t bring much good news. Lackluster global growth, ongoing profit margin pressures from inflation, and negative currency impacts are likely to translate into a year-over-year decline in S&P 500 Index earnings for the quarter. As always, guidance matters more as market participants look forward. The key question coming into this earnings season is whether the pessimism surrounding 2023 earnings has gone too far.
January 9, 2023 | LPL Research
We believe accountability and modesty are among the keys to success in this business. In striving for those qualities, LPL Research has a tradition of starting off a new year with a lessons learned commentary. We got some things wrong last year, no doubt. But those who don’t learn from their mistakes are doomed to repeat them. Here are some of our lessons learned from 2022. As you might imagine, inflation and the Federal Reserve are common themes throughout.
January 3, 2023 | LPL Research
2022 was a dizzying year as markets and the global economy continued to find itself out of balance due to the still present aftereffects of the COVID-19 pandemic and the policy response to it. If 2022 was about recognizing imbalances that had built in the economy and starting to address them, we believe 2023 will be about setting ourselves up for what comes next as the economy and markets find their way back to steadier ground.
December 19, 2022 | LPL Research
The Federal Reserve (Fed) wrapped up its last Federal Open Market Committee (FOMC) meeting of the year last week, where it hiked short-term interest rates for the seventh time in as many meetings, taking the fed funds rate to 4.5% (upper bound). A day later, both the European Central Bank (ECB) and the Bank of England (BoE) also hiked interest rates, taking their respective policy rates to the highest levels since 2008. Over 90% of central banks have hiked interest rates this year, making the (mostly) global coordinated effort unprecedented. The good news? We think we’re close to the end of these rate hiking cycles, which could lessen the headwind we’ve seen on global financial markets this year.
December 12, 2022 | LPL Research
Despite the S&P 500 Index starting December with five consecutive days of losses, we think December is down but not out. December often starts slow but historically has been a strong month. There are also some potentially supportive seasonal patterns ahead, such as the Santa Claus Rally, the outlook for January following down years, and the third year of the presidential cycle. ‘Tis the season, and this week LPL Research looks at some important seasonal patterns as the year winds down.
December 5, 2022 | LPL Research
Economic and corporate data support the initial strong reads on holiday retail sales despite the macro headwinds, reinforcing the idea that today’s consumer is in a better position than usual at this point in the business cycle. However, consumers were likely tapping into credit and using savings to support spending. In this week’s Weekly Market Commentary we share insights on publicly traded retailers, analyze their underperformance year to date, and look forward to 2023.
November 21, 2022 | LPL Research
Recent inflation data has tempered expectations for future Federal Reserve tightening, including a potential peak in the terminal rate near 5.0% in May or June of 2023. While the market has welcomed this news, history suggests the path to a Fed pivot could be volatile for stocks due to elevated inflation and interest rate risk. In this week’s Weekly Market Commentary, we explore historical equity and fixed income market performance surrounding a Fed pivot, including the prospect for solid stock performance in the back half of 2023.
November 14, 2022 | LPL Research
The growth vs. value debate has been pretty one-sided in 2022, with value outperforming growth for a sustained period for the first time in almost 15 years. However, the debate is heating up as investors begin to consider whether the pendulum will swing back to growth if inflation and interest rates decline in 2023. In this week’s Weekly Market Commentary we look at the factors driving value’s 2022 outperformance, the technical trading setup for growth and value, and what to look for in the coming months.
November 7, 2022 | LPL Research
Midterm elections are upon us, with Election Day on Tuesday. Republicans are strongly favored to win the House, and the Senate is roughly a tossup. We believe either outcome would be market-friendly, although the bigger market driver will likely be central banks’ efforts to tame inflation. In this week’s Weekly Market Commentary, we look at why the stock market may respond favorably to the midterm election, whatever the outcome.
October 31, 2022 | LPL Research
With a series of important economic indicators suggesting the economy is declining and inflation is finally decelerating, albeit very slowly, markets are beginning to factor in that the Fed may soon transition to a less aggressive stance in early 2023. Here we preview this week’s Fed meeting and discuss whether investors will get a trick or a treat.
October 24, 2022 | LPL Research
If the U.S. economy enters a recession, the causes and potential outcome will be hotly debated. At LPL Research, our starting point is always looking at history. This week’s commentary will remind us of three things we know about historical recessions.
October 17, 2022 | LPL Research
Expectations are very low for this earnings season. The challenges are many, with intense cost pressures and slowing economic growth at the top of the list. The chorus of analysts and strategists calling for big cuts to estimates has gotten louder. Expect estimates to come down, but not collapse. Here we take a look at whether expectations are low enough as we preview third quarter earnings season.
October 10, 2022 | LPL Research
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.
October 3, 2022 | LPL Research
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.
September 26, 2022 | LPL Research
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 19, 2022 | LPL Research
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.
September 12, 2022 | LPL Research
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.
September 6, 2022 | LPL Research
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.
August 29, 2022 | LPL Research
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.
August 22, 2022 | LPL Research
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.
August 15, 2022 | LPL Research
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.
August 8, 2022 | LPL Research
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.
August 1, 2022 | LPL Research
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.
July 25, 2022 | LPL Research
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.
July 18, 2022 | LPL Research
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, this year hasn’t seen a full-blown crisis like 2008–2009 or 2020, but the ride has been very bumpy.
July 5, 2022 | LPL Research
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.
June 27, 2022 | LPL Research
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.
June 21, 2022 | LPL Research
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).
June 13, 2022 | LPL Research
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. Below we discuss the outlook for diversified portfolios of stocks and bonds to make the case that the 60/40 portfolio isn’t dead.
June 6, 2022 | LPL Research
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.
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