Market Update: Tues, May 5, 2020 | LPL Financial Research

DAILY INSIGHTS

Stocks opened solidly higher. The S&P 500 climbed higher this morning, following both European and lightly-traded Asian markets, as global economies push their reopening plans forward. Markets in Japan, China, and South Korea remain closed. Oil is headed for its longest winning streak in nine months. US-China tensions appear to have eased after US Treasury officials removed the threat of economic punishment as long as China abides by the trade deal.

Municipal bonds likely muddle through. It’s a challenging time for state and local governments, with budget shortfalls and spending cuts likely as COVID-19 containment efforts weigh on growth. Support from the Fed and the federal government may help most municipalities. Elevated municipal bond yields compared to Treasuries may present an opportunity for tax-sensitive investors, but with municipal finances highly differentiated, active management may be suitable and especially important. We discuss this later today on the LPL Research blog.

Reducing US and global growth forecasts. In light of the severity of the COVID-19 lockdowns, recent economic data, and evidence the recovery may be gradual, we have reduced our US and global gross domestic product (GDP) growth forecasts. We expect a sizable full-year contraction in the United States and developed international region in 2020, consistent with Bloomberg’s consensus estimates, while global GDP may also contract. For more, read this week’s Weekly Market Commentary: Big News and New Forecasts.

Lowered 2020 S&P 500 earnings forecasts. We also lowered our 2020 S&P 500 earnings forecasts given what we’ve learned from corporate America during earnings season, the delayed recovery, and a bigger hit to the economy than we had anticipated. Our new $120–125 estimate for S&P 500 earnings per share in 2020 reflects a decline of roughly 25%, slightly larger than the typical decline in recessions. Our S&P 500 fair-value target and interest-rate forecasts are under review but remain unchanged for now. Details are in this week’s Weekly Market Commentary: Big News and New Forecasts.

New look for Daily Market Update. Beginning next week, LPL Research Daily Market Update and Friday’s Keeping You Up-To-Date will feature new banners. The crisper, lighter colors will display better on mobile devices and continue our progress to “Reimagine Research.” Look for this banner in your in-boxes beginning Monday, May 11.

IMPORTANT DISCLOSURES

This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks including possible loss of principal. Any economic forecasts set forth may not develop as predicted and are subject to change.

References to markets, asset classes, and sectors are generally regarding the corresponding market index. Indexes are unmanaged statistical composites and cannot be invested into directly. Index performance is not indicative of the performance of any investment and do not reflect fees, expenses, or sales charges. All performance referenced is historical and is no guarantee of future results.

Any 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 information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy.

This Research material was prepared by LPL Financial, LLC.

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