Per LPL Chief Investment Strategist John Lynch: “With tensions between the U.S. and China ratcheting up Friday as the U.S. implemented its first set of tariffs on Chinese goods—expected to amount to approximately $34 billion—we wanted to aggregate some of the key client-facing resources LPL Research has produced that can help investors better understand the situation and the potential implications to the equity markets, bond markets, and economy.” Continue reading
- Kavanaugh nominated to Supreme Court. President Trump nominated Brett Kavanaugh to succeed Justice Anthony Kennedy on the U.S. Supreme Court. Kavanaugh is considered a conservative on many issues, and could tilt the court firmly in that direction. His nomination will require a simple Senate majority, but it likely won’t be a smooth ride. Markets are taking the nomination in stride, as he is likely to make the court more pro-business.
As the yield curve continues to flatten, investors remain worried about the potential implications for the economy and markets. Why? Inverted yield curves have a perfect history of predicting economic recessions over the past 50 years, with nine of the past nine inversions followed by an eventual recession. Continue reading
- Solid jobs report helps solidify counter-balance to trade tensions. We continue to expect a solid overall economic backdrop, bolstered by fiscal stimulus, to overwhelm the dollar impact of tariffs in 2018 on the way to eventual trade deals between the U.S. and its major trade partners. Friday’s jobs report helps to solidify this thesis based on: 1) solid and better-than-expected June job creation (213K), in addition to positive revisions to the prior two months, 2) benign 2.7% wage inflation, and 3) an increase in the labor force participation rate, which we view as a positive economic signal.
Less than a week to go until LPL Research releases its Midyear Outlook 2018, with the latest investment insights and market guidance to take us through the rest of the year. Continue reading
July is a month that usually doesn’t have a lot of news and many market participants are on vacation, but stocks tend to do well. “Wall Street might hit the beach, but stocks are going to work. In fact, over the past 10 years, only March has a better average return for the S&P 500 Index than July does,” explained LPL Research Senior Market Strategist Ryan Detrick. Continue reading
One day is hardly anything to get too excited about, but the financials sector finally broke its record 13-session losing streak last Thursday after results from the second phase of the Federal Reserve’s (Fed) capital review offered some good news. As a reminder, banks subject to the review must meet certain minimum capital requirements in a simulated severe recession and credit market downturn scenario. Based on the results of that analysis, the Fed approves or rejects banks’ requests for share repurchases and dividend increases. Continue reading
- Shareholder payouts to generate interest in financials? Financials broke a record 13-session losing streak last Thursday with help from prospects for more capital to be returned to shareholders. Thursday’s results from the Federal Reserve’s capital plan reviews (including last week’s stress test) offered some good news. A total of 34 (of 35) institutions subjected to this process passed the review, with several having conditions attached and one–not totally unexpected–receiving an objection. An overall positive result, which was initially well received by market participants, was followed by a wave of dividend hikes and share repurchase announcements. After a disappointing first half, we expect the sector–the topic of our latest blog due out later today–to perform better over the rest of the year, and for increasing dividends and share repurchases to help garner renewed interest.
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May and June historically have tripped up stocks, which makes 2018 all the more interesting as both of those sometimes troublesome months were in the green. As LPL Research Senior Market Strategist Ryan Detrick explained, “When months that have been usually weak weren’t, that is a sign. In fact, when the S&P 500 Index has been up in both May and June, the rest of the year has been higher the past 11 times! Not to mention the full-year return has been lower only once (out of 22 times) going all the way back to 1950*.” Continue reading