Balancing Market Optimism | Daily Market Update

Posted by

Thursday, February 25, 2021

Top Story

Sentiment running hot?

There’s a lot for equity investors to be optimistic about these days, and some are wondering if optimism is getting a bit ahead of itself raising the risks of a pullback. Declining COVID-19 cases, an expanding economy, supportive fiscal and monetary policy are all feeding investor optimism. We take a look at investor sentiment and the current risks for a stock market correction in today’s LPL Research blog.

Daily Insights

  • US stocks open lower after Wednesday’s rally with the Nasdaq underperforming yet again.
  • European stocks mixed in midday trading with the United Kingdom outperforming.
  • Asian stocks were firmly higher overnight with Japan continuing to show strength.

Weekly jobless claims drop, durable goods orders surge

  • Jobless claims fall to 730,000 according to the Department of Labor, below Bloomberg consensus of 825,000.
  • Prior week’s claims revised lower by 20,000 to 841,000. Continuing claims decline modestly to 4.42 million.
  • Orders for durable goods increased by 3.4%, the most in six months and more than three times the Bloomberg consensus forecast of 1.1%.

Rising earnings expectations not just a US phenomenon

  • Earnings growth expectations for the United States in 2021 stand at 24%, based on the S&P 500 Index, up from 16% at the start of the fourth quarter on September 30, 2020.
  • Earnings are expected to grow 30% for developed international in 2021, based on the MSCI EAFE Index, up from 26% on September 30.
  • For emerging markets (EM), earnings growth estimates for 2021 stand at 36%, based on the MSCI EM Index, compared with 25% on September 30.
  • Over the past six weeks—the heart of earnings season—forward 12 month’s earnings estimates for the US, developed international, and EM have all risen by 3-5% (source: FactSet).
  • We expect substantial earnings growth globally over the next 12-18 months to support elevated valuations in the US and push non-US stocks higher in concert, particularly in Japan and EM.

Technical update

  • Energy led a more than 1% gain for the S&P 500 Index yesterday as oil prices crossed above $63/bbl. for the first time since January 8, 2020.
  • The Nasdaq continued its move higher off support at 13,000 on Wednesday, but is giving up those gains in early trading today.

COVID-19 news

The US reported 73,000 new COVID-19 cases on Wednesday, up 9.6% week over week as data begins to creep higher following last week’s weather-related disruptions to the data  (source: COVID Tracking Project).

  • The number of currently hospitalized COVID-19 patients continues to decline, down 15% week over week.
  • Food and Drug Administration (FDA) granted emergency use authorization to Johnson and Johnson’s vaccine, the third approved vaccine in the US.
  • The US vaccination rate is currently averaging roughly 1.3 million vaccine doses per day.

LPL Research in the Media

LPL Financial Chief Market Strategist Ryan Detrick joined Bloomberg Radio recently to discuss current market trends. You can listen to the full interview here (Ryan starts at the 33:00 mark).

Why Sustainable Investing is Sustainable

Chief Strategist Ryan Detrick, Equity Strategist Jeffrey Buchbinder, and guest speaker Jason Hoody, Head of Investment Manager Research discuss why sustainable investing is a major trend that isn’t going away & the potential positive impact of environmental, social, and governance factors on returns. We also explore the strong earnings season and recent retail sales during this week’s Market Signals.

 

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.

All index and market data are from FactSet and MarketWatch.

This Research material was 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 # 1-05115630