Let’s Talk Turkey

As we head into Thanksgiving week, investors have many things for which to be thankful; from a global bull market in equities, led partly by a strong resurgence in corporate earnings, to very few signs of a recession starting over the next 12-18 months. There are a few near-term catalysts we’re watching, but there are also many longer-term positive signs. And since we’ve already talked a lot about how 2017 has so far been one of the strongest and least volatile bull markets ever, today we’ll change gears and talk turkey!

In honor of everyone’s favorite Thanksgiving Day bird, did you know that the size of your average turkey has grown substantially over the past 50 years? That’s right; the average turkey was 17 pounds in 1960 and was more than 30 pounds last year.

Per Ryan Detrick, Senior Market Strategist, “Although this is purely spurious and in no way should you ever invest based on it, you have to smile when you compare the average size of turkeys in the U.S. to the S&P 500 Index. Both have moved steadily higher over the decades, suggesting investors and Thanksgiving dinner lovers alike have many things to be thankful for this year.”

To everyone from the LPL Research team, have a great Thanksgiving!

IMPORTANT DISCLOSURES

Past performance is no guarantee of future results.

This research material has been prepared by LPL Financial LLC.

Investing in stock includes numerous specific risks including: the fluctuation of dividend, loss of principal and potential illiquidity of the investment in a falling market.

The S&P 500 Index is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.

To the extent you are receiving investment advice from a separately registered independent investment advisor, please note that LPL Financial LLC is not an affiliate of and makes no representation with respect to such entity.

Not FDIC/NCUA Insured | Not Bank/Credit Union Guaranteed | May Lose Value | Not Guaranteed by any Government Agency | Not a Bank/Credit Union Deposit

Securities and Advisory services offered through LPL Financial LLC, a Registered Investment Advisor
Member FINRA/SIPC

Tracking #1-668834 (11/18)

Market Update: Friday, November 17, 2017

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Market Recap

  • Domestic markets swung higher after a slight pullback earlier in the week. S&P 500 Index +0.8%, Dow +0.8%, Nasdaq +1.3%.
  • Telecommunications, consumer staples, technology outperformed. Utilities lagged; energy also underperformed on continued oil weakness.
  • 10-year Treasury lower; yield +4 basis points (+0.04%) to 2.37%.
  • NYSE breadth positive (3:1); exchange volume slightly below 30-day avg.
  • Commodities- Crude -0.3% to $55.18/bbl., gold flat at $1278/oz., industrial metals mostly higher.
  • Economic data- U.S. manufacturing, industrial production soundly beat estimates. Jobless claims came in above expectations (249K vs. 236K).

Overnight & This Morning 

  • U.S. stocks opened near flat as markets digested House passing its tax bill.
  • European equities retracing some of yesterday’s gains. Euro STOXX 600 -0.5%, DAX -0.3%, CAC 40 -0.5%.
  • Asian markets mixed, gains attributed mostly to rise in U.S., European markets yesterday. Nikkei +0.2%, Hang Seng +0.6%, Shanghai Composite -0.5%.
  • 10-year Treasury lower; yield +1 basis point (0.01%) to 2.36%.
  • Commodities- Crude turning around week’s early losses (+1.37% to $56.09/bbl.), gold remains near flat at $1282/oz., industrial metals mostly higher.
  • Economic data- Housing starts and permits posted unexpectedly strong gains, +13.7% to 1.29 million vs. 1.19 million expected.

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  • Bounce back. The S&P 500 bounced back 0.82% yesterday, its best day in nine weeks. This of course came on the heels of its worst day in 10 weeks. Leading the way was telecommunications, which has been extremely weak recently. High-yield corporates had their best day since March, sparking much of the risk-on appetite. The weakness in high-yield bonds has been noted as a reason for potential equity weakness–be sure to read the LPL Research blog for our take on why this might not be the worry that so many claim.
  • Talking Turkey. Today on the LPL Research blog we will talk turkey and equities. We hope you like it.

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Click Here for our detailed Weekly Economic Calendar

Friday

Past performance is no guarantee of future results.

The economic forecasts set forth in the presentation may not develop as predicted.

The opinions voiced in this material are for general information only and are not intended to provide or be construed as providing specific investment advice or recommendations for any individual security. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and cannot be invested into directly.

Stock investing involves risk including loss of principal.

Investing in foreign and emerging markets securities involves special additional risks. These risks include, but are not limited to, currency risk, political risk, and risk associated with varying accounting standards. Investing in emerging markets may accentuate these risks.

Because of its narrow focus, sector investing will be subject to greater volatility than investing more broadly across many sectors and companies.

Commodity-linked investments may be more volatile and less liquid than the underlying instruments or measures, and their value may be affected by the performance of the overall commodities baskets as well as weather, disease, and regulatory developments.

Government bonds and Treasury bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value. However, the value of fund shares is not guaranteed and will fluctuate.

Investing in foreign and emerging markets debt securities involves special additional risks. These risks include, but are not limited to, currency risk, geopolitical and regulatory risk, and risk associated with varying settlement standards.

Currency risk is a form of risk that arises from the change in price of one currency against another. Whenever investors or companies have assets or business operations across national borders, they face currency risk if their positions are not hedged.

This research material has been prepared by LPL Financial LLC.

To the extent you are receiving investment advice from a separately registered independent investment advisor, please note that LPL Financial LLC is not an affiliate of and makes no representation with respect to such entity.

Not FDIC/NCUA Insured | Not Bank/Credit Union Guaranteed | May Lose Value | Not Guaranteed by any Government Agency | Not a Bank/Credit Union Deposit

Securities and Advisory services offered through LPL Financial LLC, a Registered Investment Advisor

Member FINRA/SIPC
Tracking # 1-663266

 

What’s Happening with High Yield?

High-yield bonds have been in the news lately, as the Bloomberg Barclays U.S. Corporate High-Yield Index has lost 1.1% since the beginning of November; while high-yield spreads are 0.31% higher month to date. The moves remain small by historical standards and may be at least partially attributable to profit taking after a strong year of performance, but in today’s low volatility world markets are watching for any sign that cracks may be developing.

The good news is that so far, most of the weakness in high yield has been contained to a small portion of the market. When we break the move down into individual credit rating buckets, it is clear that B-rated bonds have seen the most weakness. Yet, if investors were expecting economic growth to falter, we would expect the lowest-rated CCC bucket to underperform as their weaker financial condition suggests that they would fare the worst in a broad economic downturn.

While all sectors of the high-yield market have seen at least some weakness, the majority of the selling pressure is concentrated in a few particular sectors. The communications sector, which makes up 22% of the high-yield index, has been dragged down by weakness in several large firms in the telecommunications industry. Similarly, the non-cyclical consumer sector has seen weakness driven by the cosmetics and healthcare industries.

Equity markets have seen weakness over the past couple days, which may be a sign that they are starting to agree with the message the high-yield bond market is sending. However, the overall breadth of the high-yield pullback remains narrow at this point, which may indicate that concerns are tied more directly to specific companies or industries rather than the economy as a whole.

IMPORTANT DISCLOSURES

Past performance is no guarantee of future results.

The economic forecasts set forth in the presentation may not develop as predicted.

Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise and bonds are subject to availability and change in price.

High-Yield spread is the yield differential between the average yield of high-yield bonds and the average yield of comparable maturity Treasury bonds.

Because of their narrow focus, sector investing will be subject to greater volatility than investing more broadly across many sectors and companies.

The Barclays U.S. Corporate High-Yield Index measures the market of USD-denominated, noninvestment-grade, fixed-rate, taxable corporate bonds. Securities are classified as high yield if the middle rating of Moody’s, Fitch, and S&P is Ba1/BB+/BB+ or below, excluding emerging markets debt.

This research material has been prepared by LPL Financial LLC.

To the extent you are receiving investment advice from a separately registered independent investment advisor, please note that LPL Financial LLC is not an affiliate of and makes no representation with respect to such entity.

Not FDIC/NCUA Insured | Not Bank/Credit Union Guaranteed | May Lose Value | Not Guaranteed by any Government Agency | Not a Bank/Credit Union Deposit

Securities and Advisory services offered through LPL Financial LLC, a Registered Investment Advisor
Member FINRA/SIPC

Tracking #1-668234 (11/18)