LPL Market Signals: Another Lehman Brothers Moment?

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Market Blog

Wednesday, September 22, 2021

Few had even heard of distressed Chinese property development giant Evergrande a week ago and now it’s the biggest headline for markets. This week in the latest LPL Market Signals podcast, Ryan Detrick and Jeff Buchbinder discuss whether Evergrande will be another Lehman Brothers. Fortunately, they don’t see it, as contagion such as that observed during the Global Financial Crisis 13 years ago is unlikely given the Chinese government’s interests and level of control, the quality of the company’s collateral, and the limited exposure to a possible default outside of China.

The duo also discussed this week’s Federal Reserve policy meeting. LPL Research does not expect any curve balls from the Fed but will be watching closely for clues as to the timing of interest rate hikes once bond purchases have been tapered.

Ryan and Jeff then touched on why LPL Research lowered its year-end forecast for the 10-year Treasury yield to 1.5-1.75%. They surmised that the economic soft patch related to the Delta COVID-19 variant and lower-than-anticipated interest rates overseas were a combo that will keep rates a tad lower for longer.

Finally, the strategists pointed out that stocks have been due for a breather after more than doubling off the March 2020 lows, with Evergrande providing a convenient excuse. The timing should not be particularly surprising given this is a seasonally weak period of the year for stocks

You can watch the full video below, directly from our YouTube Channel.


 

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