A strong day. Global stocks are taking a breather after a strong day full of milestones. The S&P 500 Index notched its third consecutive record high on news of a partial U.S.-China trade deal. The Stoxx 600 Index of European stocks closed at its first record high since April 2015, and the Nikkei Index hovered around a 14-month high first reached late last week. Even though developed-market stocks have been the biggest story in global equities these days, we still see more opportunity in U.S. and emerging-market stocks due to relatively better economic outlooks.
Bumpy ride for yields. The 10-year U.S. Treasury yield was unchanged last week, but it was a bumpy ride day-to-day for fixed income investors. The 10-year yield moved an average of 5 basis points (0.05%) per day, ending the week just one basis point (0.01%) lower. The 10-year yield has been largely range-bound since October. We expect it to break above 2% in 2020 as global economic conditions improve.
Corporate spreads push lower. Corporate bond spreads have pushed lower in December as investors have shown their confidence in U.S. corporate fundamentals. Investment-grade corporate bond spreads have declined to a 21-month low, while high-yield corporate bond spreads have dropped to a 14-month low. While we’re impressed by the lack of stress in credit markets, we urge suitable investors to exercise caution in the corporate bond sector. Slowing but near-trend economic growth could support corporate profits and companies’ ability to service their debt, but moderate inflationary pressures could offset these benefits in 2020.
Here comes Santa. December is widely known as a strong month for stocks, and that seasonal trend has played out so far this month. The S&P 500 has drifted higher in the first half of December, climbing 1.6% through Monday’s close. The year-end rally may just be starting, though, as we’ll explain today on the LPL Research blog.
Uncertainty has cleared. Three of the biggest uncertainties of 2019 have finally found resolution. Listen to the new Market Signals podcast, Uncertainty Has Finally Cleared, as LPL Research Sr. Market Strategist Ryan Detrick and Equity Strategist Jeff Buchbinder discuss what this could mean for equity markets in 2020.
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.
All company names noted herein are for educational purposes only and not an indication of trading intent or a solicitation of their products or services. LPL Financial doesn’t provide research on individual equities.
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.
All indexes are unmanaged and cannot be invested into directly. Unmanaged index returns do not reflect fees, expenses, or sales charges, Index performance is not indicative of the performance of any investment.
Because of their narrow focus, sector investing will be subject to greater volatility than investing more broadly across many sectors and companies.
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.
Securities and advisory services offered through LPL Financial (LPL), a registered investment advisor and broker-dealer (member FINRA/SIPC).
Insurance products are offered through LPL or its licensed affiliates. To the extent you are receiving investment advice from a separately registered independent investment advisor, please note that LPL is not an affiliate of and makes no representation with respect to such entity.
- Not Insured by FDIC/NCUA or Any Other Government Agency
- Not Bank/Credit Union Guaranteed
- Not Bank/Credit Union Deposits or Obligations
- May Lose Value
For Public Use – Tracking # 1-928483