More U.S.-China talks scheduled. The S&P 500 Index is set for a second day of gains on news that lead trade negotiators will meet in early October in Washington, D.C. Global equities got a boost from the news, including a more than 2% gain for Japan. European markets are firmly in the green. However, odds of a major breakthrough still appear low given structural issues and lines in the sand from both sides. At this point, we would expect any progress to support stocks given widespread skepticism, in addition to generally favorable fundamentals and an accommodative Federal Reserve (Fed).
Optimistic amid uncertainty. Main Street’s optimism has increased recently, but uncertainty among U.S. businesses is historically high, according to the Fed’s latest Beige Book released September 4. At LPL Research, we maintain an indicator called the Beige Book Barometer (BBB) to gauge Main Street’s sentiment by looking at how frequently key words and phrases appear in the text. The BBB rose to 43 in the latest edition, as strong words climbed to 72 (from 62 in the July edition) and weak words increased to 29 (from 26 in the July edition). However, mentions of uncertainty rose to 33, the highest level since we began tracking this data in 2015.
Cautious view of developed international stocks. Stocks in developed foreign markets, represented by the MSCI EAFE Index, have trailed those in the United States significantly and consistently for the past decade. Still, we see a number of challenges in these markets, so we’ve maintained our cautious tactical view of developed international equities despite relatively attractive valuations, as we’ll discuss on today’s LPL Research blog. At a high level, our concerns about global policies, economic growth, and interest rates drive our caution. Strategically, in our managed portfolios we maintain meaningful allocations to international developed equities, as the longer time horizon should increase the odds of diversification benefits.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual security. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. The economic forecasts set forth in this material may not develop as predicted.
Investing in foreign and emerging markets securities involves special additional risks. These risks include, but are not limited to, currency risk, geopolitical risk, and risk associated with varying accounting standards. Investing in emerging markets may accentuate these risks.
There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.
Investing involves risks including possible loss of principal. No investment strategy or risk management technique can guarantee return or eliminate risk in all market environments.
All performance referenced is historical and is no guarantee of future results.
This research material has been prepared by LPL Financial LLC.
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