Tuesday, March 23, 2021
The Bull Market Turns One
On the LPL Market Signals podcast, Chief Market Strategist Ryan Detrick and Equity Strategist Jeff Buchbinder consider what could be in store for stocks in year two of the bull market, along with a discussion of rates and the latest Federal Reserve meeting.
Stocks open lower as oil prices pull back from their highs
- West Texas Intermediate crude oil (WTI) crude oil slipped below $60 per barrel, down 10% from its March 5 high.
- European stocks are mostly lower as Germany imposes an Easter lockdown to quell third wave of COVID-19 infections.
- Asian stocks traded lower overnight after erasing early gains. China touched year-to date lows on the news of European and U.S. sanctions.
Corporate credit markets have sold off this year: A harbinger of things to come?
- Corporate credit markets, as defined by the Bloomberg Barclays U.S. Corporate index, are down over 5% for the year.
- The increase in yields for credit issuers is in-line with what has happened in the Treasury
- Additionally, the yield premium over Treasuries for taking on corporate credit risk has remained well behaved. Thus, the sell-off in the credit markets has been an interest rate story and not a credit loss story, in our view.
- For more on our view of the recent sell-off in corporate credit markets, see today’s LPL Research blog, available at 12pm ET.
Happy Birthday Bull market!
- Today’s close will be the one year anniversary of the bear market low on March 23, 2020.
- While it has been a very challenging year, in many ways it has been an entirely normal first year for a bull market: Rates have gone up, small caps have outperformed, and while growth style stocks dominated value initially, cyclically oriented value stocks have come roaring back in late 2020 and early 2021.
- While in many ways entirely normal, the start to this bull market has been unusually strong—the S&P 500 Index has been up over 70% in the last year.
- But that was the first year of the bull market. For a look at what has happened in the second year historically, please see this week’s Weekly Market Commentary.
Strong performance from mega-cap growth stocks hid weaker performance down the cap scale yesterday. The S&P 500 gained 0.7%, but barely more than half the stocks in the index were positive for the day, and the Russell 2000 fell 0.9%. Small-caps’ momentum relative to large has been weakening for more than a month, with the ratio of the Russell 2000 to S&P 500 now 15% above its 200-day moving average versus a highpoint of 22% in early February.
LPL Research in the Media
LPL Financial Chief Market Strategist Ryan Detrick joined Mike Santoli this morning on CNBC’s Squawk Box to discuss the second year of the bull market. You can watch the full interview here.
The Second Year of The Bull Market Begins
LPL Research discuss the end of the bear market and the trends of a bull market in year two. Learn more in this week’s Weekly Market Commentary.
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