Thursday, July 15, 2021
Street View Midyear Outlook 2021
In the latest LPL Street View video, LPL Financial Chief Market Strategist Ryan Detrick takes a closer look at what the LPL Research team thinks is coming in the second half of 2021 and beyond, with a special focus on the economy, policy, stocks, and bonds.
US equities opened lower as traders continue to consider the transitory effects of inflation on the economy
- The Nasdaq composite showed some early relative strength.
- European equities are lower as the U.K. filled almost 1 million job vacancies in June, the most ever.
- Asian markets finished their session mixed as China (Shanghai Composite) finished up 1% as June economic activity fell short of estimates.
Initial unemployment claims fall to pandemic low as labor market heals
Initial claims for unemployment fell to 360,000, an improvement from last week’s 386,000 but weaker than economists’ consensus estimate.
- Initial claims remain above pre-pandemic levels, indicating that labor markets still have a way to go to fully recover.
- Many businesses still report having difficulty finding qualified workers, which may make them more inclined to retain current employees.
- Unemployment benefits, difficulty finding child care, and concern about new variants may all be contributing to a slowing labor market recovery.
Challenges and opportunities for Japan
- Economic growth and momentum in Japan has lagged much of the developed world in 2021.
- Slower vaccine distribution has hindered Japan’s recovery, but the pace has started to pick up and nearly 20% of its population is fully vaccinated (vs. roughly 50% in the US).
- Although forward-looking manufacturing surveys have been soft, a 21% year-over-year increase in industrial production and 50% year-over-year increase in exports through May are notable.
- While we do not see Japan as a reason to favor developed international currently, the opportunity is there for it to help at some point in the second half as the country’s economy more fully opens.
- A weak yen could potentially provide a boost to the export-driven economy as well.
- Friday saw the strongest daily breadth reading in over a year, sparking hopes for a broad-based rally.
- However, though the S&P 500 Index is slightly positive thus far this week, participation has reverted back to only a few names, with the NYSE Cumulative Advance-Decline line lower and continuing its recent streak of lower highs since early June.
- Participation remains especially weak among small caps, which topped out more than 4 months ago and have lagged the S&P 500 by more than 15% since then.
- The Russell 2000 has critical support near 2100, its low point since February and also near its 200-day moving average.
Midyear Outlook 2021 has launched. While the speed can be exhilarating as economic growth accelerates, it can also be dangerous. Midyear Outlook 2021: Picking Up Speed is designed to help you navigate the risks and opportunities brought upon by the economy’s reopening for the rest of 2021 and beyond. For more information, please read our Midyear Outlook 2021.
Three Things to Watch This Earnings Season
LPL Research anticipates a strong earnings season and outlines the three things investors should keep on their radars this quarter. Learn more in this week’s Weekly Market Commentary.
Midyear Outlook 2021 Is Here: What Does LPL Research Think Is On the Horizon?
In this week’s LPL Market Signals podcast, LPL Research’s Chief Market Strategist, Ryan Detrick and Equity Strategist, Jeff Buchbinder discuss how to navigate the risks and opportunities brought upon by the economy’s reopening for the rest of 2021 and beyond.
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