Market Update: Fri, July 19, 2019 | LPL Financial Research

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Daily Insights

Another week of new highs. While stocks have drifted slightly lower this week, the S&P 500 Index, Dow Jones Industrial Average, and Nasdaq Composite all recorded record highs on Monday. In addition, cyclical stocks have led the advance over the past month, a welcome change from the first five months of the year when defensive and low volatility stocks were outperforming. We believe this rotation under the surface is not only healthy but necessary and coincides with views expressed in our Midyear Outlook. On a technical basis, we see support for the S&P 500 at the 2,930 and 2,872 and believe pullbacks to these areas may represent buyable opportunities for suitable investors.

LEI decreased in June. Leading indicators are slowing but still signaling an expansion. The Conference Board’s Leading Economic Index (LEI), which is one of our Five Forecasters, slightly declined 0.3% month over month in June to 111.5–still a 1.6% year-over-year increase–after rising 2.5% in May and 2.7% in April. This 0.3% decrease was the first decline in LEI since last December and was driven by weaknesses in new orders for manufacturing, housing permits, and unemployment insurance claims. We will continue to closely monitor the LEI as June marks the slowest year-over-year growth readings since February of 2017 with both April and May marking the previous slowest readings in year-over-year growth. Even with the weaker LEI numbers we still remain in expansionary territory with the LEI further illustrating the backdrop of a sustained but slowing economic expansion.

Can stocks predict the next President? Stocks were weak heading into the 2016 election, one clue that President Trump would win the White House. In fact, going back in history, when the S&P 500 was lower the three months before an election, it boded well for a new party to be in the White House. The flipside is that when stocks were higher the three months before an election, the current party in power tended to win the White House. In fact, this trend has been right the past 40 years! We will take a closer look at this interesting phenomena later today on the LPL Research blog.

 

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Because of their narrow focus, sector investing will be subject to greater volatility than investing more broadly across many sectors and companies.

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