LPL Weekly Market Commentary

Earnings Season Takeaways

LPL Research writes, “Earnings season delivered as expected. With 92% of results for S&P 500 Index companies in the books, first quarter 2019 earnings are tracking to roughly flat with the prior year [Figure 1]. While flat earnings don’t sound impressive, we consider it a victory given consensus estimates were calling for a 4–5% decline when earnings season began (source: FactSet). Here, we recap the numbers and provide some key takeaways from earnings season.” Key takeaways include: We consider first quarter earnings season a success based on the upside surprise and resilience of estimates for the rest of this year. It appears an earnings recession has been averted and better earnings days lie ahead, though trade uncertainty is a huge wild card. Our base case remains that we will get a trade deal with China early this summer and consensus expectations for S&P 500 earnings growth in 2019 of 3–4% may prove to be conservative. Read more from John Lynch Chief Investment Strategist, and Jeffrey Buchbinder, CFA Equity Strategist, LPL Financial.

Stocks Reach Record Highs

LPL Research writes that “Stocks reached new highs last week. The S&P 500 Index completed a V-shaped recovery last week to register its first record high since September 20, 2018, to close at 2933.68 on April 23.  Here we share our thoughts on what this record could mean for stocks going forward.” Key takeaways include: The S&P 500’s new record high set last week ended a more than 7-month drought without one. History tells us that new highs should be celebrated, not feared. Even though the market may be due for a pullback, we think stocks will be higher at year end. Read more here from John Lynch, Chief Investment Strategist, and Jeffrey Buchbinder, CFA Equity Strategist, LPL Financial.

QI Earnings Preview: Light at the End of the Tunnel

LPL Research tells us that “First quarter earnings season kicks off this week and the bar seems low. Consensus estimates for first quarter earnings season are calling for a slight yearover-year decline in S&P 500 Index earnings amid the economic soft patch at the start of the year. Marking the one-year anniversary of the tax reform earnings boost, in the first quarter of 2018, has made the annual comparison more difficult, [as shown in Figure 1 in link]. We expect roughly flat earnings for the quarter, but the streak of seven straight quarters of earnings growth could come to an end. Here we preview the upcoming earnings season, highlight some key themes, and share some thoughts on the 2019 corporate profit outlook.”  The short version:  flat earnings may be the best case scenario for Q1 earnings, but there is light at the end of the tunnel, with growth likely ahead. Key takeaways include: We expect roughly flat earnings for the first quarter, putting the seven-quarter streak of growth in jeopardy. The picture seems quite a bit better when looking beyond the first quarter, which we see as a trough in growth. We expect enough economic growth ahead to drive record profits in 2019, supported by fiscal stimulus, robust manufacturing output, healthy labor markets, and a U.S.-China trade deal. Read more here from John Lynch Chief Investment Strategist, and Jeffrey Buchbinder, CFA Equity Strategist, LPL Financial.

The Stock Market’s Final Four

LPL Research says, “The NCAA Final Four is set. On the men’s side, Auburn, Michigan State, Texas Tech, and Virginia are headed to Minneapolis to determine this year’s college basketball national champion. On the women’s side, UConn and Oregon punched their tickets over the weekend while the other two spots will be decided tonight—Baylor and Notre Dame are the favorites.  In that spirit, our weekly commentaries discuss our “Final Four Factors” for the markets and economy over the balance of the year. In today’s Weekly Market Commentary, we share our “Final Four Factors” for the stock market in 2019: policy, the economy, rates, and profits.” Click here to read more from John Lynch Chief Investment Strategist, and Jeffrey Buchbinder, CFA Equity Strategist, LPL Financial.

The Bull Turns 10

LPL Research writes:  “The bull market will celebrate its tenth birthday on March 9, 2019. During that period, the S&P 500 Index has increased more than fourfold in value, producing a total return of 410% (17.7% annualized) while rising 314% in price. Concerns over the global economy, along with a potential policy mistake by the Federal Reserve (Fed) and the trade dispute with China, all have many wondering just how much the longest bull market ever could have left in the tank. This week, we’ll show why this bull market is indeed alive and well and could make it to 11 next year.” Key takeaways include: During the 10-year bull market, the S&P 500 Index has more than quadrupled in value. It might be the longest bull market, but the 1990s bull market saw substantially higher returns. Market breadth continues to support higher equity prices and eventual new highs. To read more from John Lynch Chief Investment Strategist, and Ryan Detrick, CMT Senior Market Strategist, LPL Financial, click here.

Five Key Questions

February 26, 2019 | posted in: Blog, Financial Insights, LPL Weekly Market Commentary | by

LPL Research writes, “This week we reassess the stock market landscape following the latest rally. Specifically, we answer five of the most common questions we’ve received recently. We use multiple lenses to assess the stock market, including fundamentals, valuations, and technical analysis.”  Those questions are: Can stocks keep going higher? Is earnings growth strong enough to propel stocks higher? Have stocks gotten too expensive? Do we need a retest? Is sentiment now overly bullish? For answers to these questions and more from John Lynch, Chief Investment Strategist, Ryan Detrick, CMT, Senior Market Strategist, and Jefrrey Buchbinder, CFA, LPL Financial, please click here.