Post-Pandemic Low for Continuing Claims | Daily Market Update

Thursday, June 24, 2021

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How to Budget Your Fixed-Income Exposure

LPL Financial Director of Research Marc Zabicki discusses budgeting your fixed-income allocation as a strategy to help balance your potential risk and return in the latest LPL Street View video.

Daily Insights

U.S. equities open higher amid yesterday’s mixed market close

U.S. small caps (Russell 2000) opened the trading session higher as these names continue to benefit from the reopening.

European markets are higher through midday trading as the Bank of England maintained its current monetary policy.

Asian markets finished their session marginally in the green with the Hong Kong (Hang Seng) closing almost 0.25% higher.

Post-pandemic low for continuing claims

Initial claims for unemployment insurance came in slightly above expectations again, remaining above 400k despite expectations for just 380k. However, continuing claims fell to a new post-pandemic low of 3.39 million, beating consensus estimates 3.46 million. Continuing claims continue to show clear improvement but remain well above the early March 2020 levels of about 1.7 million.

Earnings strength made non-US stock valuations even more attractive

  • At nearly 22 times next 12 month’s consensus S&P 500 earnings estimate (source: FactSet), U.S. stock valuations are well above developed international and emerging markets (EM) price-to-earnings ratios (PE).
  • The gap between the U.S. and developed international has expanded recently, with the MSCI EAFE Index now priced at a 23% discount to the S&P 500, near the largest in 30 years.
  • The story is similar for emerging markets, with the MSCI EM Index trading at a 34% discount to U.S. stocks, largest since the mid-2000s.
  • Strong non-U.S. earnings growth prospects have driven this expanded valuation gap, which we expect to enable non-U.S. stocks to at least keep up with the U.S. in the second half of 2021.
  • For developed international, where our view is now neutral with a positive bias, it’s easy to make a case for second half outperformance if value stocks lead and Europe and Japan successfully emerge from the pandemic.

Manufacturing activity indices at historic levels

  • The robust post-COVID recovery has brought about a historic rebound in U.S. manufacturing activity.
  • Pent-up demand and low inventories of capital goods have caused companies to fire up their machines at record levels, delighting manufacturing supply management professionals.
  • Both the IHS Markit and ISM Manufacturing Indices have been robust across the board, as new order growth, hiring plans, and the backlog of orders point to better health in the sector.
  • For more details, see our latest post on the LPL Research blog, available by 12:00 p.m. ET.

Big bank payouts likely to rise

  • The Federal Reserve’s stress test results are due out after the close.
  • We expect passing grades, paving the way for increased dividends and share buybacks in coming quarters.
  • The unexpectedly rapid pace of balance sheet recovery from the pandemic means payout increases are likely to be meaningful, a possible catalyst for the shares going forward.
  • We continue to expect banks to benefit from gradually higher interest rates and a steeper yield curve over the rest of 2021, supporting potential outperformance for financials.

Technical update

Markets are higher in early trading and the S&P 500 Index is on pace to test record highs. 4255 represents the current closing high water mark for the S&P 500, as it looks to follow the Nasdaq’s recent surge to new highs. The small-cap Russell 2000, which has largely stagnated since January, needs to gain 2.5% from Tuesday’s close to set a new all-time high.

Inflation And What the Fed Is Saying

Inflation seems to be on the rise, but LPL Research believes there are good reasons to think it will be transitory. Learn more in this week’s Weekly Market Commentary.

What Does The Fed Say?

On this week’s LPL Market Signals podcast, LPL Research discusses why a more hawkish Federal Reserve shouldn’t have been much of a surprise, the sharp earnings revisions higher, and reasons for downgraded technology.



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