Futures point to higher open. Signs that the spread of the deadly coronavirus may be slowing have markets refocusing on favorable U.S. economic fundamentals and a generally positive earnings season. S&P 500 Index futures are pointing to a higher open following gains in Asia overnight and in Europe at midday.
Coronavirus new case growth may be slowing. While new hotspots may develop and uncertainty remains high, this would be a positive sign that containment efforts are working. The virus will likely have a meaningful impact on Chinese growth in the first quarter, and a modest impact on global growth. If stimulus efforts can help bridge the soft patch, expected pent-up demand later in the year may put global economic acceleration back on track.
Economic optimism prevails. The National Federation for Independent Businesses (NFIB) Small Business Optimism Index climbed in January and remains near the top of its historical range, while a recent Gallup poll revealed that the number of Americans who said they are better off today than a year ago hit its highest level since 1999. Optimism plays an important role in economic activity, and as long as optimism persists the odds of a recession will remain fairly low. While there is a risk that optimism can lead to overborrowing and overspending, overheating the economy and creating economic imbalances, we see few if any signs of such excesses at this time.
Financial press refocuses on Treasury yield curve inversion. A brief inversion last week (short-term yields moving above than long-term) and intraday inversion yesterday have put inversion’s historical role as an early recession signal back in focus. While we do watch the yield curve closely, global demand for U.S. Treasuries and years of extraordinary central bank policy may be changing the meaning of the signal. We continue to look for a 3-month Treasury yield at least 50 basis points (0.5%) higher than the 10-year Treasury yield, a signal that remains far off at this time. For more on the yield curve, see the discussion in the LPL Research blog, to be posted later today.
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.
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.
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|
If your advisor is located at a bank or credit union, please note that the bank/credit union is not registered as a broker-dealer or investment advisor. Registered representatives of LPL may also be employees of the bank/credit union. These products and services are being offered through LPL or its affiliates, which are separate entities from, and not affiliates of, the bank/credit union. Securities and insurance offered through LPL or its affiliates are:
For Public Use – Tracking # 1-949903