LPL Market Signals Podcast

Geopolitical Risks Percolate, Economy to Glide Lower in Q2

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In the latest Market Signals podcast, Chief Investment Officer, Marc Zabicki and Chief Economist, Dr. Jeffrey Roach discuss the recent downdraft in equity prices and call out the geopolitical risk factors that investors may have not properly built into their tactical thinking for 2024. The two also cover what is expected to be a weakening economic situation in the second quarter as most major global economies are expected to come in below their long-term growth trends this year. 

From the second quarter on, through 2024, Dr. Roach points to the consumer as a point of potential, relative weakness now that spending trends have fully recovered post-COVID-19.  While the jobs market remains relatively strong, it may not take much to change those fortunes given that overall growth is expected to weaken as the year progresses. Meanwhile, inflation trends in the Eurozone (trending better than the U.S.), could have the European Central Bank acting to reduce rates before the Federal Reserve.

Finally, while inflation trends in the U.S. can be seen as lower, but newly stubborn, both strategist believe the U.S. Consumer Price Index (CPI) number will indeed continue to glide lower in the coming months — CPI could end the year below 3%.

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Market’s “Out-Hawking” the Fed

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In the latest LPL Market Signals podcast, LPL strategists recap a jittery week for markets as rates rose and geopolitical concerns weighed, discuss what reduced rate cut expectations could mean for the bond market, and preview the upcoming earnings season.

Stocks fell last week as interest rates rose and concerns about potential retaliation by Iran against Israel escalated. The energy sector topped the weekly sector rankings on higher oil prices, while communication services also fared well on digital media strength.

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IPO Activity as a Market Signal

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In the latest LPL Market Signals podcast, LPL strategists recap last week’s market activity underpinned by rotation, share what the initial public offering (IPO) market is signaling about risk, and preview this week’s economic calendar headlined by Friday’s jobs report.

On April Fool’s Day, LPL strategists tell it like it is in observing a recent market rotation. While the major averages didn’t move much last week, under the surface, there was a lot going on with strong gains for cyclical and defensive value stocks while finished in the red.

Markets were closed for the Good Friday holiday but that didn’t stop the government from releasing important inflation data. The strategists discuss what the February personal consumption expenditures (PCE) deflator means for the Federal Reserve’s rate cutting plans.

Next, the strategists discuss the IPO market which has been perking up lately. The pickup in activity and performance of recent IPOs are encouraging signs and provide some evidence of the underlying health of the stock market. A broadening out of offerings beyond technology would be welcomed.

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16 Charts for the NCAA Sweet 16: The Best Week for the S&P 500

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In the latest LPL Market Signals podcast, LPL strategists recap the best week for the S&P 500 of 2024, run through 16 important charts on capital markets and the economy in honor of the NCAA’s Sweet 16, and preview this week’s economic calendar.

The S&P 500 gained 2.3% last week, paced by strength in the mega-cap technology stocks. Despite some claims that only a few stocks are driving the strength, recent breadth readings have been improving and are at relatively healthy levels.

Next, the strategists share 16 charts in honor of the NCAA Sweet 16, across a number of topics. They include market breadth, mega-cap technology leadership, growth vs. value, small caps, Fed Reserve rate cut expectations, inflation, Japan, and China.

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It’s Central Bank Week: What to Expect

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In the latest LPL Market Signals podcast, LPL strategists recap a week of rotation but little overall movement for the broad large cap stock indexes and preview this week’s central bank meetings for the Federal Reserve and Bank of Japan.

The S&P 500 went nowhere last week but two under-the-surface developments stood out. First, interest rate sensitivity weighed on some of the income sectors and small caps as last week’s slightly hot inflation data pushed rates higher. Second, the recent rally in commodity prices drove solid gains in the energy and materials sectors.

Next, the strategist preview the Fed meeting this week. The Fed’s dot plot (represents consensus views of Fed officials for the future path of rates) is likely to shift to three cuts from four, which markets are anticipating.

The strategists also preview this weeks’ Bank of Japan (BOJ) meeting. The anticipated, and historic, rate hike from the BOJ — expected either this week or next month — is important because of the potential implications for U.S. Treasury yields and the yen.

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Translating Fed-Speak Ahead of a Big Week for Central Banks

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In the latest LPL Market Signals podcast, LPL Research strategists recap another positive week for stocks that included a new high for the NASDAQ, translate the latest Fed-speak, and recap a solid fourth quarter earnings season.

The S&P 500 rose for the 16th week out of 18 to yet another record high, fueled by technology strength and powering the NASDAQ Composite to its own record high for the first time since November 2021.

Next, the strategists translate the latest Fed-speak. Comments from Fed officials, particularly Fed Governor Christopher Waller, preserve the likelihood of rate cuts this year but the timetable has potentially been pushed out later in the summer.

The strategists also recap a solid fourth quarter earnings season which saw surprisingly strong profit margins and outstanding results from the “Super Six” mega-cap technology companies.

Finally, the strategists preview a very busy week ahead, headlined by the February jobs report and Fed Chair Jerome Powell’s congressional testimony, in addition to the European Central Bank meeting.

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Charting the Rally and Why Stock Buybacks Could Help It Continue

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In the latest LPL Market Signals podcast, LPL strategists recap another positive week for stocks that included more new highs, highlight five interesting charts, and explain why stock buybacks matter for markets.

The S&P 500 rose for the 15th week out of 17 to close at another record high. The strategists discuss key drivers of the latest advance and prospects for a pullback.

Next, the strategists highlight five interesting charts related to the latest rally to new highs and market breadth, noting how the Magnificent Seven have transformed into the Fabulous Five.

The strategists then make the case that buybacks are indeed “back” as corporate America becomes more confident in the macroeconomic backdrop. They note the rally in shares of buyback-oriented companies could have more room to run and highlight which mega caps have more stock to potentially buy.

Finally, the strategists preview the week ahead, headlined by the Federal Reserve’s preferred inflation measure, the core PCE deflator, slated for Thursday, February 29.

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Raising The Caution Flag

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In the latest Market Signals podcast LPL Financial’s Head of Macro Strategy, Kristian Kerr and Chief Investment Officer, Marc Zabicki, discuss the market’s recalibration of Federal Reserve expectations, some of the key catalysts to the lift in Japan’s equity markets, and a few contrarian signs that the tech-driven rise in U.S. markets could be getting a bit long in the tooth.

Based on the January consumer price and producer price numbers that came in higher-than-expected, markets hit an air pocket during the Valentines’ week as participants rolled back expectations for near-term Federal Reserve rate cuts. Previously, markets were pricing in five to six rate cuts, but after the hotter inflation numbers, expectations have been recalibrated to four or five — which is more in line with our house view.

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Celebrate Stock Market Milestones, but Don’t Forget About Bonds

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In the latest LPL Market Signals podcast, LPL strategists provide a healthy dose of good news, including the S&P 500 breaking 5,000, excellent company earnings, and a brightening economic outlook, while also identifying some places to find value in the bond market.

The S&P 500 rose for the 14th week out of the past 15, powering the S&P 500 to close above 5,000 for the first time. The strategists explain what that milestone might mean for stocks going forward.

While the bond market hasn’t reached any milestones lately, there remains compelling value, particularly in high quality fixed income sectors. High quality sectors like Agency mortgage-backed securities and U.S. Treasuries should provide attractive income in 2024 and could provide attractive price appreciation as well if the economy stumbles.

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Good News May Actually Be Good News for Stocks

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In the latest LPL Market Signals podcast, LPL strategists recap another positive week for stocks despite the late week jump in rates, pull out some interesting nuggets from last week’s jobs report, discuss whether the January Barometer signal will work this year, highlight some big tech earnings news, and preview a sparse economic calendar for the week ahead.

The S&P 500 rose for the 13th week in 14 to a new all-time high despite the backup in interest rates after the booming January jobs report. Mostly well-received results from mega-cap technology companies drove a strong week for growth stocks but caused some to ask if the market had come too far too fast.

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Stock Valuation Check Up and a Semiconductor Breakout

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The S&P 500 rose 1.1% last week after a series of fresh record highs. The strategists make the case that stocks may not be done rising, especially if the January Barometer ends positive this month.

The strategists also review several interesting charts, including a look at recent strength in semiconductors. They discuss the likelihood for momentum to continue in the space and what the recent return to positive sales growth in chips could mean for the industry.

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Super Six Strength Powers the S and P 500 to New Heights

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Stocks moved solidly higher last week on the back of strong gains from the technology sector and the “Super Six,” i.e., the Magnificent Seven minus Tesla (TSLA), whose shares lost 3% last week. Tech powered the S&P 500 to its first new high in more than two years. The strategists discuss what history tells us about where stocks may head next.

The strategists characterize the start of earnings season as messy while warning investors to “peel back the onion” and look at results excluding the significant charges incurred by banks to replenish the FDIC deposit insurance fund.

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Municipal Bond Market Outlook 2024

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Stocks and bonds both rallied last week as markets gained more confidence in Federal Reserve rate cuts following generally benign inflation data last week. The S&P 500 ended within striking distance of its January 2022 all-time high.

Next, the strategists offered up their 2024 outlook for the municipal market. With nominal yields above levels seen much of the past decade, still strong fundamentals, and perhaps an improving supply/demand dynamic, munis could be poised for another solid year in 2024.

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A Bumpy Start to 2024 for Stocks

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The year is off to a bumpy start as the S&P 500 broke its nine-week win streak, failed to get the Santa Claus rally, all while just barely falling short of a new all-time high.

The strategists highlight several key takeaways from the December jobs report. On the surface, the report was a bit stronger than expected but it doesn’t change LPL Research’s view that the Federal Reserve will cut rates midyear. The bond market volatility after the report was dramatic, particularly in the Fed-sensitive 2-year Treasury yield.

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Fed Pivot Sends Dow to Record Highs

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The S&P 500 rose for seventh straight week as equity markets celebrated the pivot from the Federal Reserve (Fed) at the latest policy meeting. The Dow reached a new record high while the S&P 500 is less than 2% away. The question now is whether markets have over-priced rate cuts in 2024.

Oil prices rebounded last week as geopolitical risk started to get priced in again despite record U.S. production. Seasonality likely also played roles in the reversal. Meanwhile, electric vehicle demand and prospects for more stimulus in China have helped support copper prices.

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2024 Outlook: A Turning Point

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In 2024, a recession may emerge as consumers buckle under debt burdens and use up their excess savings, but a Federal Reserve (Fed) that is sensitive to risk management might provide an offset by taking interest rates down again in the new year. Inflation may still remain a concern, but the Fed will likely be less laser-focused given the trajectory is going in the right direction.

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Favorable Bond Risk-Reward Setup Even at Lower Rates

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The S&P 500 rose for the fifth straight week as equity markets celebrated the sharp drop in interest rates. Interest rate sensitive segments of the equity markets fared best.

While the 10-year Treasury yield is down around 0.75% from its October highs, given still elevated starting yields, many core bond sectors can potentially generate high single/low double digit returns if yields continue lower. In many cases, yields would need to increase by 1% or more from current levels to generate negative returns over a 12-month horizon, which the strategists see as unlikely.

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Technical Look at Stocks, Yields, and Gold

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In the latest LPL Market Signals podcast, the LPL Research strategists recap a fourth straight positive week for the S&P 500, highlight several key technical charts to watch, discuss gold’s prospects, and preview a busy economic calendar that includes key inflation data.

The S&P 500 rose during the holiday-shortened week, its fourth straight weekly gain despite a lack of obvious positive catalysts. The strategists assess the potential for further gains after a 9% rally in November.

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Talking Turkey, Equities, and the Market

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In the latest LPL Market Signals podcast, Chief Investment Officer Marc Zabicki and Chief Global Strategist Quincy Krosby recap another strong week for stocks and talk about the new market sentiment that has been affecting both stocks and bonds.

Quincy also analyzes the current earnings environment, whether this market rally has further legs, and some signs that the consumer strength that was so prevalent this year has begun to wane.

And finally, she takes a dive into current Federal Reserve policy expectations and uncovers some doubts that the market still believes the Fed’s higher for longer interest rate mantra.

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Are Possible Cracks in the U.S. Economy Emerging? 

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The S&P 500 rose for the second straight week, led by mega-cap technology stocks. Leadership remains narrow, an ongoing concern for the sustainability of the latest rally.

The strategists provide some key technical levels to watch on the S&P 500 and the 10-year Treasury yield to break the current downtrend for stocks and uptrend for yields.

Next the strategists discuss some potential cracks that are emerging in the economy, specifically with regard to increasing credit card delinquencies and rising debt service costs.

Finally, the strategists preview a busy week of economic data, including consumer inflation and retail sales, President Biden’s upcoming meeting with President Xi, and earnings reports from several key retailers ahead of the all-important holiday shopping season.

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Stocks Surge as Rates Tumble

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Earnings results over the past week were good enough so as to not get in the way of the stock market’s powerful rally. S&P 500 earnings are tracking to a more than 4% year-over-year increase thanks in part to a solid beat rate of 81%. However, cuts to forward earnings estimates became slightly more pronounced over the past week.

It has been another challenging year for municipal bonds (munis), but with the Fed (likely) done raising rates and the market entering a strong seasonal period, the strategists believe the muni market may be in for a year-end rally. Moreover, if the economy slows, munis are generally a more defensive asset class than corporates, which should help support muni prices

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Possible Scares for Markets and the Economy

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The S&P 500 lost 2.5% last week largely due to geopolitical fears, sending the index into correction territory. The strategists discuss how much investors should worry about the double-digit declines in the S&P 500.

In honor of Halloween the strategists list some possible scares for markets and the economy, including a potential widening of the conflict in the Middle East, profligate U.S. government spending, rising rates, tightening financial conditions, and the worst affordability in housing in decades.

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