Pushing higher. U.S. stocks are relatively unchanged as investors weigh improving global data and concerns around a dangerous viral outbreak in China. The S&P 500 Index was down for the week through Thursday’s close, in what could be only its third weekly decline since the beginning of October. However, stocks have pushed higher in a persistent fashion these past few months, so today’s action could be biased to the upside.
Stretched sentiment. While we like seeing stocks rise, we’re starting to see signs of overbought conditions and stretched sentiment. The S&P 500 has now gone 29 trading days without a two-day decline, the second-longest streak since 2005. The number of individual investors who feel bullish about the next six months (relative to those who feel bearish or neutral) rose to a 15-month high this week, according to American Association of Individual Investors (AAII) survey data released Thursday. Even though we still like long-term fundamentals, we think a modest pullback is looking increasingly possible.
Manufacturing activity perks up. The U.S.-China phase-one trade deal has helped perk up manufacturing activity around the globe, according to preliminary January data from Markit. Markit’s Eurozone Purchasing Managers’ Index (PMI) rose to 47.8 this month (from 46.3 in December), its biggest monthly gain since November 2017. Markit’s gauge of German manufacturing activity also climbed to an 11-month high in January. We think we’ve likely seen the worst of the global manufacturing downturn (unless conditions unexpectedly turn) so we’ll hopefully see more improvement over the next few months.
LEI declines. Leading economic indicators fell for the month and barely grew year over year in December 2019, according to the Conference Board’s Leading Economic Index (LEI) data released Thursday. The LEI, which we include as one of the “Five Forecasters” of our Recession Watch Dashboard, has yet to turn negative year over year in this economic cycle, even though it has come close over the past few months. Today on the LPL Research blog, we’ll break down December’s LEI report, and what we think it could take to boost growth in leading data.
LPL Research on Bloomberg Radio. LPL Financial Senior Market Strategist Ryan Detrick was on Bloomberg Radio recently to discuss the lack of volatility, geopolitics, emerging markets, and more. The interview starts at the 30:00 mark, and you can listen here.
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 professional prior to investing. The economic forecasts set forth in this material may not develop as predicted.
U.S. Treasuries may be considered “safe haven” investments but do carry some degree of risk including interest rate, credit, and market risk.
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.
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.
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 that is not an LPL affiliate, please note LPL 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 # 1-942202