Is There Value in Value?

Despite a strong 2016, there may still be some value in the value sector.     We recommend that investors generally maintain balance across value and growth stocks. Improving economic and profit growth create a favorable backdrop for value. Our sector views point to balanced style views, particularly our positive views of both technology and financials. Other factors to consider include relative valuations (favors growth) and technical analysis (favors value). Read more from Burt White Chief Investment Officer, LPL Financial Jeffrey Buchbinder, CFA Market Strategist, LPL Financial

Next stop…DOW 36,000?

January 27, 2017 | posted in: Blog, Financial Insights | by

With the Dow conquering 20,000 on Wednesday, there is a bit of euphoria out there on “The Street,” along with a healthy dose of skepticism. I’m now fielding questions such as “Is this the start of a new upward leg of the stock market?” or alternatively, “Should I sell my stocks now because they are so pricey?” And, of course there are the general types of questions along the lines of, “What does Dow 20,000 mean?” or “What effect does Dow 20,000 have on my portfolio?” The answer to these questions requires some perspective and experience, and since I’ve been in the investment world since 1975, I believe I maintain a good inventory of both. Let’s travel back to 1999 together for a moment, and let me set the scene. The Dow has risen by close to 18% per year for the prior 20 years* and optimism reigns supreme. I am at an investment seminar in Boston and the huge concern on the minds of the participants and the speakers is the “Y2K problem,” (remember that?), which addressed how computers would handle the century’s turn. Massive spending increases on the parts of corporate IT departments attempting to ward off the potential Y2K disaster are adding fuel to a seemingly unstoppable tech stock rally. During this seminar, I am presented with a signed copy of a book by Glassman and Hassett called “DOW 36000: The New Strategy for Profiting from the Coming Rise in the Stock Markets.” At the time of the book’s publishing in early 1999, the Dow is trading close to 10,000. Many professionals embrace the book’s thesis that a “new paradigm” for evaluating stocks is taking hold – one not as concerned with underlying fundamentals such as price/earnings ratios…Accordingly, stocks are deemed to be underpriced and ready to soar to unfathomable heights. So goes the thinking. Sadly, the book’s publishing was followed by the worst decade in stock market history, which included a tech crash, and later, a devastating full market collapse. After reaching a high of close to 14,000 in October 2007, the Dow dropped to 6,500 during 2009. Glassman and Hassett, the former Wall Street darlings, were eviscerated by the press and in academic circles. As a reminder of what occurred, I always keep my signed copy of the book close at hand to show to clients and colleagues. It invariably draws out a few laughs and stimulates lively discussion. So what does 20,000 mean? On the surface, it doesn’t mean a whole lot. After all, 20,000 is just a weighted measurement of the prices of 30 stocks which comprise the Dow Jones Industrial Average index. But to me, after I dive beyond the surface and reflect on what has occurred in the markets over my career, it actually has much greater significance.. Dow 20,000 means and affirms to me that stock prices DO rise in the long run, and if one holds on to their quality stocks through bad times and good, they will always make money. The ride may be rough, and at times appear to be bleak and hopeless; look no further than the state of economic affairs in 2008-9, during the mortgage and real estate collapse, when the Dow fell to 6,500. But, do the math: a new $1000 investment in the Dow in 2009 would be worth over $3000 today. Good investing takes patience and a long view. At the same time, 20,000 also indicates that it may be time to proceed with caution. It means we must not forget that when markets are frothy, investors can get too optimistic and not see the danger lurking around the bend. Euphoric investors can drive stock prices to unsustainable levels, resulting in inevitable large market corrections. And, as we experienced in recent years, depending on the magnitude of the correction, it may take years for the market to recover. So, Glassman and Hassett were appropriately discredited, but in fact, in one aspect they were right. I am certain the Dow will, indeed, reach 36,000 one day. But when will it happen? That I can’t tell you, and the Dow may very well fall back to 15,000 again before reaching 36,000. But I do believe 36,000 is inevitable, in the same way that rocky markets and large market corrections are. It is the nature of financial markets. Understanding the bumps and turns, and keeping a lid on the euphoria, will serve you well and ensure that you capture the returns that the markets will inevitably bring you. Do I hear Dow 50,000?   *Dow Jones 12/31/79-12/31/99, via AmericanFunds.com/advisor/tools/planning/hypotheticals/update-review/htm   DISCLOSURES: The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly. This is a hypothetical example and is not representative of any specific investment. Your results may vary. Stock investing involves risk including loss of principal.

Welcome to Dow 20K!

January 26, 2017 | posted in: Blog, Financial Insights | by

1/25/17 Was A Big Day On Wall Street… Check out LPL Research’s charts of the previous milestones at  “Welcome to Dow 20K.”

LPL Research Weekly Market Commentary 1/23/17

I WANT MY GDP:  NOWCAST PREVIEW FOR Q4 2016     With the first (“advance”) estimate of GDP for Q4 2016 coming at the end of the week, Fed NowCast models are forecasting an average real growth of 2.5%. Over time, NowCast models have been no more accurate than economist consensus forecasts, but they provide greater transparency on the forecast drivers. NowCasts can help provide insight on the impact of individual economic releases as well as how different economic sectors are performing.   Read More  »

Are Important and Good Changes Afoot for 529 Plans?

January 19, 2017 | posted in: Blog, Financial Insights | by

It’s never too early to start saving for college.  Important & good changes may be afoot for 529 college savings plans.   Read more from Investment News.

Market Happenings To Watch For In January

The new year is underway and there are, as always, events to monitor. We will be monitoring many significant events this month, including fourth quarter earnings, Chinese New Year, and the first FOMC meeting of 2017. We’ll know quickly how the economy is looking and if the earnings recovery that started last quarter is real, or was a short-lived bounce   For more information about the current conditions from Chief Economic Strategist, LPL Financial John J. Canally, Jr., CFA, and Senior Market Strategist, LPL Financial Ryan Detrick, CMT at LPL Research .