LPL Weekly Market Commentary

Strong Week Ahead of a Big Weekend

According to LPL Research, “It was a great week for the stock market. The S&P 500 Index rallied 4.9% last week, leaving the index less than 6% from its record high, on September 20, 2018 (excluding today’s gains). Gains were driven by increasing optimism (now proven to be warranted) for progress on U.S.-China trade talks at the G20 summit over the weekend and a more dovish outlook from Federal Reserve Chair Jay Powel. This week we share our thoughts on these major market-moving events and reiterate our positive stock market outlook.” Key takeaways include: Last week’s stock market rally was driven by optimism (now clearly warranted) surrounding U.S.-China trade talks and a more dovish Fed. The events added to the positive fundamental case for stocks here, while stock valuations are quite reasonable. The technical picture is muddled, but big gains to start this week—should they hold—would help increase the odds of further gains from a technical analysis perspective. To read more from John Lynch Chief Investment Strategist, and Jeffrey Buchbinder, CFA Equity Strategist, LPL Financial, click here.

Corporate America Impresses Again

November 28, 2018 | posted in: Blog, Financial Insights, LPL Weekly Market Commentary | by

According to LPL Research, “Corporate America produced another outstanding earnings season. We expected another quarter of strong earnings growth, and corporate America delivered even more than we anticipated. Third quarter numbers were excellent, even if the boost from the new tax law is excluded, as has been the case throughout this year. Revenue and earnings upside compared with expectations was particularly impressive, making prior assertions of an earnings growth peak premature. We’re also impressed by the resilience of companies’ outlooks in the face of tariffs and ongoing trade policy uncertainty.” Key takeaways include: Third quarter earnings season was again very impressive, with S&P 500 Index earnings growing 28% year over year, the fastest pace since the fourth quarter of 2010. A pickup in economic growth, strong manufacturing activity, and tax cuts were the key growth drivers. Guidance was generally positive despite tariffs and ongoing trade policy uncertainty To read more from John Lynch, Chief Investment Strategist, and Jeffrey Buchbinder, CFA Equity Strategist, LPL Financial, click here.

The Bright Side

LPL Research writes that “October was one of the worst months we’ve seen in years for stocks, but we see a much brighter future. The next two months could have a nice year-end rally thanks to historically bullish seasonal patterns during midterm years and the extreme buying strength we saw last week.” Key takeaways include: October was one of the worst months for stocks in years. Stocks have historically turned bullish into year-end following midterm elections. Within the four-year presidential cycle, this quarter and the following two quarters next year are historically the best for stocks To read more from John Lynch Chief Investment Strategist, and Ryan Detrick, CMT Senior Market Strategist, LPL Financial, click here.

A Tough Week, But There Are Positive Signs Ahead

LPL Research points out that it has been another tough week for stocks…but that there are reasons to “encourage long-term investors to embrace this volatility, not fear it, especially against a backdrop of solid fundamentals.” Key takeaways include: The S&P 500 fell about 4% last week amid a myriad of concerns, among them possible peak earnings and a potentially overly aggressive Federal Reserve. Historical market patterns suggest solid prospects for a late-year rally remain in place. We see several positives that may help stocks make another run higher, including moving past the upcoming midterm elections, the solid U.S. economic backdrop, and a still-strong earnings outlook To read more from John Lynch Chief Investment Strategist, Jeffrey Buchbinder, CFA Equity Strategist, and Ryan Detrick, CMT Senior Market Strategist, LPL Financial, click here.

Earnings Update: So Far, So Good!

LPL Research reports that “Earnings season off to a good start. Third quarter earnings season is rolling and, so far, results have been quite good overall, supported by strong U.S. economic growth, robust U.S. manufacturing activity, tax cuts, and big increases in energy and financials sector profits. Below we recap the results of earnings season thus far, discuss why we expect strong results to continue throughout the reporting season, and highlight several keys we are watching.” Key takeaways include: With about one-fifth of third quarter earnings results in, the numbers have been solid thus far despite tariffs and increasing wage pressures. We expect the good results to continue based on the favorable U.S. macroeconomic environment, including robust manufacturing activity and strong nominal GDP growth. We’ll be keeping an eye on profit-margin pressures, an eventual peak in earnings growth, and China-U.S. trade tensions, plus possible slower growth in Europe. To read more from John Lynch Chief Investment Strategist, and Jeffrey Buchbinder, CFA Equity Strategist, LPL Financial, click here.

Perspective on Market Volatility

From LPL Research:  “After several months of historic calm, stocks sold off sharply last week. Rising interest rates and trade war fears were cited as the primary causes of the sell-off that caused the Dow Jones Industrial Average to drop more than 1300 points on Wednesday and Thursday combined. Concerns about corporate profit margins peaking and a potentially overcrowded tech trade also likely played a role in upsetting a market that had been extraordinarily calm over the past six months. The S&P 500 Index did manage to pare losses, thanks to solid gains on Friday, but still ended the week down over 4%, for the worst week since March. Here we share some perspective on the latest bout of market volatility, which is not particularly unusual, and share our thoughts on where stocks may go from here.” Key takeaways include: Stocks fell sharply late last week amid a plethora of concerns, primarily rising interest rates and trade. We share our perspective on the sell-off and discuss where stocks may go from here. Technical analysis and sentiment measures indicate stocks may be near a bottom To read more from John Lynch Chief Investment Strategist, Jeffrey Buchbinder, CFA Equity Strategist, and Ryan Detrick, CMT Senior Market Strategist, LPL Financial, click here.