Market Update: Tuesday, September 18, 2018

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Daily Insights

  • LPL Market Signals Podcast. In case you missed it, listen to Senior Market Strategist Ryan Detrick and Equity Strategist & Portfolio Manager Jeffrey Buchbinder talk about pullbacks in emerging markets, the manufacturing sector’s continued strength, and other factors affecting the current economic cycle. Please join our discussion on social via #LPLMarketSignals.

  • Weekly Commentaries: Midterm Elections and Beige Book Barometer. In this week’s Weekly Economic Commentary, we update our proprietary Beige Book Barometer and provide analysis on Main Street’s view of the U.S. economy. The Weekly Market Commentary examines the historical impact of midterm elections on U.S. stocks, and makes a case for what we could see from the S&P 500 Index after the upcoming election season.

  • Another round of tariffs. On Monday, the U.S. announced a 10% tariff on another $200 billion of Chinese imports that will take effect on September 24, a move markets have anticipated for most of this month. President Trump also vowed to increase the tariff rate to 25% on January 1 if no trade agreement is reached by then. Global stocks rallied after the news, likely because investors expected a steeper rate from the outset. Trump’s threat of a higher rate next year could also force the U.S. and China into negotiation later this year. The Shanghai Composite jumped 2% intraday, poised for its biggest gain in nearly a month, and the S&P 500 climbed slightly higher after the open.

  • Recent inflation data support house rate view. Contained inflation and gradually rising interest rates continue to support our expectation for a modest increase in the 10-year Treasury yield over the balance of 2018. As noted in our Midyear Outlook 2018, our year-end forecast calls for a 10-year yield of 2.75-3.25%. We expect the Federal Reserve (Fed) will raise its fed funds target rate next week and proceed gradually after that. Accordingly, we maintain our preference for the intermediate portion of the yield curve. We do not believe fixed income investors are being sufficiently compensated for taking rate risk at the longer end of the yield curve given the marginal additional yield pickup.

  • Stocks and midterm elections. 2018 continues to be a solid year for U.S. equities even amid well-documented concerns, including the uncertainty of midterm elections. Today on the LPL Research blog, we highlight the Dow’s performance at this stage of the presidential cycle, which could give bulls another reason to smile.

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  • Eurozone Markit PMI (Preliminary, Sep)
  • Markit U.S. Manufacturing PMI (Preliminary, Sep)


IMPORTANT DISCLOSURES

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Index data obtained via FactSet

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