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.
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