Tuesday, June 8, 2021
Meme Stock Mania
Chief Market Strategist Ryan Detrick and Equity Strategist Jeff Buchbinder examine what meme mania means for investors, explore how policy could impact things for the rest of 2021, and dissect the recent weaker than expected monthly jobs data on today’s LPL Research Market Signals podcast.
The S&P 500 Index opened slightly higher as the index flirts with a new all-time high
- The Nasdaq Composite is approximately 0.5% higher as growth stocks continue their advance and the Dow Jones Industrial Average is little changed.
- European equities are higher through midday trading as German industrial production missed April’s estimates given transitory challenges.
- Asian equities finished lower amid news of Japan’s economy shrinking less than expected during Q1.
Municipals are expensive but technicals remain favorable
- The fundamental backdrop for many muni issuers has improved recently. Yields, however, are amongst the lowest they’ve ever been.
- The technical backdrop for municipal securities remains supportive, in our view.
- Investor flows remain strong and we’re currently entering a seasonal period where reinvestment money is expected to outpace new municipal bond issuance.
- All that money chasing fewer investment opportunities should provide stability to bond prices, at least in the near-term.
- For more on our views on the technical support for muni bonds, see today’s LPL Research blog, available at 1p.m. ET.
Stock and bond markets look split on inflation
The 10-year Treasury yield has slowly declined since early April, signaling bond markets may not be too concerned about upside inflation surprises, but strength this year in inflation-resilient stock sectors are telling a different story.
- The rule of thumb is to trust bond markets over stock markets since they tend to be more focused on evaluating risk.
- Federal Reserve bond buying and continued messaging that they’ll move slowly on any rate hikes may be creating some distortions.
- The better read may be that both markets are anticipating some pick-up in inflation, with bond market participants also valuing the diversification benefit of bonds if there’s a surprise that pushes equities down.
- We see somewhat more risk to bonds for inflation, and more potential resilience for stocks as economies continue to benefit from reopening.
The S&P 500 Index continues to churn just a hair below all-time highs but has been unable to push below its May 7 intraday high of 4238 thus far. The 10-year yield bears watching as well. The benchmark note hasn’t closed below 1.52% since early March.
LPL Research in the Media
LPL Financial Chief Market Strategist Ryan Detrick joined Bloomberg radio last week to discuss recent market trends. You can listen to the interview here (Ryan starts at the 28:00 mark).
Policy Shifts May Challenge Markets
LPL Research contends that policy tailwinds may turn into headwinds in 2022, but economic fundamentals are likely to dominate. Learn more in this week’s Weekly Market Commentary, available on the Resource Center, Marketing on Demand, and Broadridge.
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