Tuesday, April 27, 2021
Let’s Talk About Valuations
LPL Research discuss why stocks might not be as expensive as many think and how the economy continues to improve faster than expected in the latest Market Signals podcast.
U.S. stocks open little changed while commodities push higher
- Copper prices surge to the highest price in nine years and the Bloomberg Commodity Index is up nearly 15% year to date.
- European markets are modestly lower in midday trading as trading assess the state of Brexit negotiations.
- Asian stocks were mixed overnight with Japan underperforming amid rising COVID-19 cases.
Markets will have a lot to digest in the next 48 hours
- The Federal Reserve’s (Fed) two-day policy meeting starts today and will conclude Wednesday with the release of the Fed’s updated policy statement, a new set of projections, and a press conference by Fed Chair Jerome Powell.
- President Biden will make his first address to a joint session of Congress on Wednesday. Biden will be pitching his legislative agenda, but Wall Street will be listening for the current state of negotiations on corporate and personal taxes.
- Earnings will be in focus today as tech giants Alphabet and Microsoft report after the close; Apple reports Wednesday.
- While the fundamental backdrop for stocks remains strong, expectations are also high. We expect continued advances from major indexes over the course of the year, but potentially with increased volatility as markets become more sensitive to downside catalysts.
Infrastructure plan, higher income taxes, and municipal bonds
- President Biden’s proposed $2 trillion infrastructure plan would tangentially support the municipal market through better economic growth and higher tax revenues.
- There could be other provisions, though, that would impact the municipal market more directly, including the potential for higher income taxes.
- These provisions could be supportive of the already lofty valuations seen in the municipal market.
- For more on our views of how the infrastructure plan and potentially higher income taxes impact the municipal market, see today’s LPL Research blog, available at 12p.m. ET.
On Monday, the Nasdaq Composite set a new record closing high for the first time since February 12. However, the index’s 0.9% gain was not enough to eclipse the intraday highs from February 16 at 14,175. While the absolute trend of the index remains strong, the relative leadership of growth stocks remains more of an open question. Since September 2, the Russell 1000 Value Index has outperformed the Russell 1000 Growth by nearly 12%.
LPL Research in the Media
LPL Financial Chief Market Strategist Ryan Detrick joined Money Life with Chuck Jaffe last week to discuss the current state of the economy and where to invest. You can listen to the full interview here.
Is All The Good News Priced In?
Investors are appropriately optimistic, given the backdrop of a dramatically improving economy, the rapid pace of vaccinations, massive levels of fiscal and monetary stimulus, and surging earnings. Learn more in this week’s Weekly Market Commentary.
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