Maintaining Value Overweight | Daily Market Update

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Friday, June 25, 2021

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Maintaining value overweight

Growth has outperformed value handily over recent months, but we still believe that the current environment supports value stocks. We take a look at those fundamental factors, as well as the technical chart later today on the LPL Research blog, available at 12:00 p.m. ET.

Daily Insights

U.S. equities point toward a positive open following Thursday’s strong rally

  • The Dow Jones Industrial Average is leading U.S. markets higher today as cyclical names rebound from last week.
  • European equities are slightly lower through midday trading as German consumer confidence jumps to its highest reading since August 2020 and UK consumer sentiment reached its highest level since March 2020.
  • Asian markets ended their trading sessions higher with both the Hong Kong (Hang Seng) and China (Shanghai Composite) markets stand out; South Korean (KOSPI) stocks close at a record high.

Fed’s preferred measure of inflation accelerates but in line with expectations

Core personal consumption expenditure (PCE) inflation rose 0.5% month over month and 3.4% year over year, approximately in line with economists’ consensus estimates.

  • Base effects (the numbers rolling off from last year) are still having some impact on the year-over-year number.
  • Despite the increase, the absence of a surprise to the upside may help reassure market participants that they’re not missing anything.
  • While inflation may continue to run higher than the last economic cycle for an extended time, we believe that currently elevated levels will gradually start to normalize as the price impact of reopening begins to settle.

Technical update

The S&P 500 Index closed at a new record high Thursday; however, participation continues to deteriorate under the surface. In fact, Thursday’s new high occurred with less than half the stocks in the index trading above their 50-day moving averages, the first time this has occurred since December 1999.

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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