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Weekly Market Commentary

How Much Higher Can Rates Go?

September 19, 2022

Inflationary dynamics continue to surprise to the upside, and markets now expect the Fed to pursue one of its most aggressive rate hiking campaign in years. U.S. Treasury yields continue to move higher as well. We think we’ve seen the biggest moves higher in yields, but as long as inflationary pressures continue to surprise to the upside, interest rate volatility will likely remain. 

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Getting Jobs Market Back into Balance

September 12, 2022

Federal Reserve Chairman Jay Powell reiterated his warning that getting inflation under control will require some pain. Powell is likely making these warnings based on the arcane, clunky relationship between inflation and unemployment. he key to getting the market back into balance is a bigger labor force, and the economy is starting to experience a larger labor force as individuals come off the sidelines and rejoin the job market.

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September’s Calendar Cruelty for Stocks

September 6, 2022

The difficult 2022 for stocks may not get much easier because as we now wait for better news on the inflation front, we have to contend with a seasonally weak month of September. While we got some welcome news in Friday’s jobs report, more evidence of falling inflation will take time to materialize. The good news is a seasonally strong fourth quarter is right around the corner. 

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Earnings Recap: Still Hanging In There

August 29th, 2022

Earnings growth of 6-7% doesn’t sound very exciting, but given the challenges corporate America has faced, we consider the nearly-complete second-quarter earnings season a resounding success. The numerous challenges last quarter included a slowing economy, intensifying inflation pressures, ongoing global supply chain disruptions, and a surging U.S. dollar.

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Is This the Start of a New Bull Market?

August 22nd, 2022

Existing home sales fell 5.9% in July, the sixth consecutive month of decline as higher interest rates weigh on housing affordability and prospective buyers. As the housing market slowed, so did prices. The median price for a single-family home was $410,600, a decline of roughly $10,000 from June. 

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Is This the Start of a New Bull Market?

August 15th, 2022

Investors cheered the two better-than-expected inflation reports last week, pushing the S&P 500 to 16% above its June 16 low and only 11% below its all-time high. After this rebound, the key question investors are asking is whether this is a bear market rally that will soon fizzle or the start of a new bull market. 

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The Case for a U.S. Recession Weakens

August 8th, 2022

Payrolls surged by 528,000 in July and the unemployment rate fell to 3.5%. Moreover, net revisions to the previous two months added another 28,000 jobs to the original estimates. Clearly, these gains further cement the claim that the U.S. is currently not in recession. 

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What a Week for the Stock Market

August 1st, 2022

A day after the Fed hiked rates by 0.75% to an upper bound of 2.50% the markets had to digest a second consecutive quarter of negative growth. That naturally led more to ask the question: Are we in a recession?

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3 Factors That Could Change The Inflation Course

July 25th, 2022

There are at least three factors that could change the course of inflation. First, the improvement in shipping and general supply bottlenecks could ease inflation. Second, strength in the U.S. dollar could offset some of the current inflationary pressures. And third, import prices have moderated since the beginning of 2022 and as import prices slow, we expect consumer prices to eventually reflect the slowdown in import prices.

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Managing Market Volatility

July 18th, 2022

Markets rarely give us clear skies, and there are always threats to watch for on the horizon, but the right preparation, context, and support can help us navigate anything that may lie ahead. So far, this year hasn’t seen a full-blown crisis like 2008–2009 or 2020, but the ride has been very bumpy. 

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Constructive, Not Complacent: Lowering S&P 500 Target

July 5th, 2022

Stocks have been unable to make up much ground since the June 16 lows, with a bear market rally amounting to only around a 4.3% gain in the S&P 500 Index since then (as of July 1). After the more than 6% rally the week of June 24 and the increasing optimism that came with that bounce, stocks pulled back again last week—the 11th down week for the index in the past 13 weeks. 

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Relief at the Pump and for Portfolios?

June 27th, 2022

2022 has been rough all-around for the American consumer. Not only are we battling decades-high inflation, but investors’ portfolios are off to one of the worst starts to a year in history as we near the halfway point. Our technical work is first and foremost rooted in trend following, and the trend in both stock and bond prices so far this year have of course been down. 

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Bear Market Q&A

June 20th, 2022

The bear market that started on June 13 has left the S&P 500 Index 23.5% below its January 3 high. After the initial positive reaction to the Federal Reserve’s first 0.75% rate hike since 1994 and tough talk on inflation, heightened fears of recession and that the Fed might “break something” sent stocks down for the 10th week out of 11 for only the second time in history (The first was in 1970). 

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Is the 60/40 Portfolio Dead?

June 13th, 2022

This year has been tough for investors, not just because stocks have fallen but also because bonds have not helped mitigate those losses as they have historically done. Below we discuss the outlook for diversified portfolios of stocks and bonds to make the case that the 60/40 portfolio isn’t dead. 

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The Economy Is Slowing But Not Shrinking

June 6th, 2022

Many pundits are issuing recession warnings and saying the economy is heading for a hard landing. Amid the cacophony of voices, we think the economy is slowing just like central bankers want but not shrinking. Further, we argue that a slowing economy is very different than a shrinking one. 

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Looking through the Clouds

June 1st, 2022

At the risk of sounding cliché, making the case for stocks to stage a second half rally back to the prior highs requires investors to see through some heavy cloud cover. If you prefer another market cliché, it’s times like these when investors need a crystal ball.

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Dawn of a New Era for Core Bonds

May 23rd, 2022

Core bond investors have experienced the worst start to the year ever. However tough this year has been so far though (and it has been tough), the potential for future returns has improved meaningfully, in our view. Starting yields tend to be a good predictor of future returns and have become more attractive in a number of markets recently. 

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Corporate America Delivers, Market Attention Focused Elsewhere

May 16th, 2022

First quarter earnings season was solid by just about any measure, but based on recent market behavior it’s obvious that in general market participants paid little attention. This is a macro-driven market, so it will likely take positive macro developments, i.e., better news on the inflation front, to turn stocks around.

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Why You Shouldn’t Sell Your Stocks in May This Year

May 2nd, 2022

“Sell in May and go away” is probably the most widely cited stock market cliché in history. Every year a barrage of Wall Street commentaries, media stories, and investor questions flood in about the popular stock market adage. 

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Businesses and Consumers Likely Protected From Near-Term Recession

April 25th, 2022

Not all recessions are created equal. Previous downturns in the U.S. were prompted by various shocks, with the most recent recession started by health and government-induced shutdowns. Other recessions started in the corporate sector, whereas some started from commodity shocks.

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What to Watch This Earnings Season

April 18th, 2022

First quarter earnings season is rolling. BlackRock, Delta Airlines, Goldman Sachs, JPMorgan Chase, and Morgan Stanley were among the first 16 S&P 500 companies to report March quarter results, following 20 index constituents with quarters ending in February that had already reported. 

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Headwinds to Global Growth: An Economy of Two Halves

April 11, 2022

LPL Research reduced U.S. and global GDP forecasts due to Russian commodity disruptions, elevated inflation dynamics, and higher borrowing costs. Still, we expect the U.S. economy to grow 2.7-3.2% in 2022, supported by business investment and consumer services spending in the latter half of this year. 

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Stock Market Final Four

April 4, 2022

As the Final Four NCAA Basketball Tournament rolls on in New Orleans, we continue our tradition of picking a stock market final four. We have identified our four key factors for the stock market outlook: 1) Consumer spending, 2) Earnings, 3) Interest rates, and 4) Inflation. 

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Are Core Bonds Under Pressure?

March 21st, 2022

Core bond investors have experienced one of the worst starts to the year ever, potentially calling into question the validity of bonds in a portfolio. Despite the poor start, we don’t think the value proposition for bonds has changed much.

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Ready, Set, Rate Hike

March 14th, 2022

The Federal Reserve (Fed) meets this week and in all likelihood will raise short-term interest rates for the first time since emergency levels of monetary accommodation were provided to markets after the COVID-19 shutdowns. 

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Downshift in U.S. Market Growth But Still Above Trend

March 7th, 2022

We currently expect the U.S. economy to grow 3.7% in 2022. The risks are to the downside since the Fed may err on tightening too fast, the recent commodity spike may trickle down to the U.S. consumer, and supply and demand imbalances may last longer than expected. 

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How Soon Are Rate Hikes Coming?

February 28th, 2022

With inflationary pressures running higher than many central bankers are comfortable with, calls for interest rate hikes have become louder. A number of important central bank meetings are set to take place in March including the Federal Reserve, European Central Bank, Bank of Canada, Bank of England, and the Reserve Bank of Australia, to name a few. 

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Strong Earnings Momentum to Start 2022

February 21st, 2022

Corporate America has capped off an outstanding 2021 with an excellent fourth quarter earnings season so far. Entering 2021, the consensus estimate for S&P 500 Index earnings per share (EPS) was less than $170. Now with fourth quarter results mostly in the books, that number is 22% higher at $208.

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Which Region Will Get the Gold in 2022

February 7th, 2022

The near-10% correction in the S&P 500 Index and even larger drawdown in the Nasdaq have gotten a lot of attention this year. What hasn’t gotten as much attention—and maybe surprising to some—is the relative resilience in equity markets outside the U.S. In our special Winter Olympics edition of the Weekly Market Commentary, we hand out medals to the U.S., developed international, and emerging markets. Who do we think will get the gold?

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Sustainable Investing Year in Review

January 31st, 2022

Sustainable investing hit several milestones in 2021, but continued to attract its critics. Below we look at how sustainable investing fits within the broader concept of sustainability, its growth during 2021, and an implementation framework that has been helpful for many.

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Don't Expect the Fed To End This Bull Anytime Soon

January 24th, 2022

After a tough start for stocks in 2022, investors are looking for reasons to expect a rebound. After more than doubling off the pandemic lows in March 2020, without anything more than a 5% pullback in 2021, stocks probably needed a break.

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Don't Expect the Fed To End This Bull Anytime Soon

January 17th, 2022

The Federal Reserve (Fed) has engineered a massive hawkish shift, causing a bit more stock market volatility recently. But how worried should investors be? Here we take a look back at historical performance for stocks before, after, and much after initial Fed rate hikes to help reassure any nervous investors out there.

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Can Corporate America Keep it Rolling?

January 10th, 2022

Corporate America has been on quite a run. Coming into 2021, S&P 500 Index companies were expected to generate less than $170 in earnings per share. As 2022 begins, it looks like that number may end up higher than the latest LPL Research estimate of $205, one of the biggest earnings upside surprises ever.

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Three 2021 Market Lessons for 2022

January 3rd, 2022

In many ways, 2021 was a typical year for markets, but it also reinforced some basic market lessons that are hard to learn, even if they are not new. As we launch into the New Year, we’re highlighting three 2021 market lessons that we think may matter for 2022.

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