Weekly Market Commentary

The following market commentary is prepared for you by LPL Financial Research. Click here to view all LPL Weekly Commentaries on LPL.com.

Will January’s Market Hit the Trifecta? The Seasonal Indicators

January 30, 2023
The script has been flipped in 2023. Last year’s underperformers have turned into outperformers this year, driving the S&P 500 Index up over 5% this month. The pace and composition of the rally have left many investors skeptical over its sustainability, especially amid a lackluster earnings season thus far. Of course, the market is also forward-looking, with expectations for falling inflation and a less hawkish Federal Reserve (Fed) as we progress into 2023.

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A Feisty Bull-Bear Debate: Weighing the Pros and Cons

January 23, 2023
The latest episode of the debate between stock market bulls and bears has gotten more interesting. For every valid point from one side, there’s an equally compelling argument on the other side. Perhaps the best reason for the debate is the uniqueness of this environment. The pandemic and its aftermath don’t come with a historical playbook. We haven’t been here before. So we’ll just recognize that the outlook is uncertain, weigh the pros and cons, glean what we can from the past, and give it our best shot. Call us cautious bulls.

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Q4 Earnings Preview: Pessimism May Be Overdone

January 17, 2023
Fourth quarter earnings season is underway and probably won’t bring much good news. Lackluster global growth, ongoing profit margin pressures from inflation, and negative currency impacts are likely to translate into a year-over-year decline in S&P 500 Index earnings for the quarter. As always, guidance matters more as market participants look forward. The key question coming into this earnings season is whether the pessimism surrounding 2023 earnings has gone too far.

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Market, Stocks, and Bonds Lessons Learned from 2022

January 9, 2023
We believe accountability and modesty are among the keys to success in this business. In striving for those qualities, LPL Research has a tradition of starting off a new year with a lessons learned commentary. We got some things wrong last year, no doubt. But those who don’t learn from their mistakes are doomed to repeat them. Here are some of our lessons learned from 2022. As you might imagine, inflation and the Federal Reserve are common themes throughout.

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2023 Market Outlook: LPL Research Takes a Look at the Year Ahead

January 3, 2023
2022 was a dizzying year as markets and the global economy continued to find itself out of balance due to the still present aftereffects of the COVID-19 pandemic and the policy response to it. If 2022 was about recognizing imbalances that had built in the economy and starting to address them, we believe 2023 will be about setting ourselves up for what comes next as the economy and markets find their way back to steadier ground. 

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Historic Year for Central Bank Activity and Rate Hikes

December 19, 2022
The Federal Reserve (Fed) wrapped up its last Federal Open Market Committee (FOMC) meeting of the year last week, where it hiked short-term interest rates for the seventh time in as many meetings, taking the fed funds rate to 4.5% (upper bound). A day later, both the European Central Bank (ECB) and the Bank of England (BoE) also hiked interest rates, taking their respective policy rates to the highest levels since 2008. Over 90% of central banks have hiked interest rates this year, making the (mostly) global coordinated effort unprecedented. The good news? We think we’re close to the end of these rate hiking cycles, which could lessen the headwind we’ve seen on global financial markets this year.

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December Down but Not Out: Seasonality Trends Point to Market Recovery

December 12, 2022
Despite the S&P 500 Index starting December with five consecutive days of losses, we think December is down but not out. December often starts slow but historically has been a strong month. There are also some potentially supportive seasonal patterns ahead, such as the Santa Claus Rally, the outlook for January following down years, and the third year of the presidential cycle. ‘Tis the season, and this week LPL Research looks at some important seasonal patterns as the year winds down.

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Resilient Consumers Have Not Saved Retail Stocks

December 5, 2022
Economic and corporate data support the initial strong reads on holiday retail sales despite the macro headwinds, reinforcing the idea that today’s consumer is in a better position than usual at this point in the business cycle. However, consumers were likely tapping into credit and using savings to support spending. In this week’s Weekly Market Commentary we share insights on publicly traded retailers, analyze their underperformance year to date, and look forward to 2023.

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Playbook for a Fed Pivot: Exploring Equity and Fixed Income Market Performance

November 21, 2022
Recent inflation data has tempered expectations for future Federal Reserve tightening, including a potential peak in the terminal rate near 5.0% in May or June of 2023. While the market has welcomed this news, history suggests the path to a Fed pivot could be volatile for stocks due to elevated inflation and interest rate risk. In this week’s Weekly Market Commentary, we explore historical equity and fixed income market performance surrounding a Fed pivot, including the prospect for solid stock performance in the back half of 2023.

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Inflation and Rising Rates Supports Value

November 14, 2022
The growth vs. value debate has been pretty one-sided in 2022, with value outperforming growth for a sustained period for the first time in almost 15 years. However, the debate is heating up as investors begin to consider whether the pendulum will swing back to growth if inflation and interest rates decline in 2023. 

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How Midterm Elections May Move Markets

November 7, 2022
Midterm elections are upon us, with Election Day on Tuesday. Republicans are strongly favored to win the House, and the Senate is roughly a tossup. We believe either outcome would be market-friendly, although the bigger market driver will likely be central banks’ efforts to tame inflation. In this week’s Weekly Market Commentary, we look at why the stock market may respond favorably to the midterm election, whatever the outcome.

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Federal Reserve Preview: TRICK or Treat?

October 31, 2022
With a series of important economic indicators suggesting the economy is declining and inflation is finally decelerating, albeit very slowly, markets are beginning to factor in that the Fed may soon transition to a less aggressive stance in early 2023. Here we preview this week’s Fed meeting and discuss whether investors will get a trick or a treat.

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Three Things to Know About Recessions

October 24, 2022
If the U.S. economy enters a recession, the causes and potential outcomes will be hotly debated. At LPL Research, our starting point is always looking at history. This week’s commentary will remind us of three things we know about historical recessions.

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Low Bar for Earnings Season Brings Third Quarter Expectations Down

October 17, 2022
Expectations are very low for this earnings season. The challenges are many, with intense cost pressures and slowing economic growth at the top of the list. The chorus of analysts and strategists calling for big cuts to estimates has gotten louder. Expect estimates to come down, but not collapse. 

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Pockets of Vulnerability Magnified by Monetary Policy

October 10, 2022
As Federal Reserve (Fed) officials continue to emphasize the Fed’s commitment to restoring price stability, the dollar marches ever higher. Markets are currently pricing in another 75-basis point rate hike at the November 2 Fed meeting as calls for the Fed to halt its aggressive campaign are mounting. Worries persist that tightening financial conditions, underpinned by a stronger dollar...

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Markets On Watch As Xi Jinping’s Influence To Be Tested In October

October 3, 2022
On October 16, China will begin its 20th National Congress of the Chinese Communist Party in Beijing. This plenum is especially significant because it is expected that President Xi Jinping will be granted an unprecedented third term,

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Why It May Be Time To Take Advantage Of Higher Yields

September 26, 2022
Because the equity risk within our diversified asset allocation portfolios is still the largest contributor to total portfolio risk, we like the defensive properties that bonds could play on a go-forward basis. In the form of high-quality bonds, interest rate exposure has been a good diversifier to equity risk. And while that hasn’t been the case this year, we think at these higher interest rate levels, bonds can act like that diversifier again. 

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How Much Higher Can Rates Go?

September 20, 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.

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September’s Calendar Cruelty for Stocks

September 6, 2022
Existing home sales fell 5.9% in July, the sixth consecutive month of declines as higher interest rates weigh on housing affordability and prospective buyers. As the housing market slowed, so did prices. 

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Earnings Recap: Still Hanging In There

August 29, 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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Home Sales Fall (Again). What’s Next?

August 22, 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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Is This the Start of a New Bull Market?

August 15, 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 8, 2022
Market strategists and pundits make the relationship between recessions and the stock market seem binary, but each economic contraction is different and has different effects on earnings. That said, it is still instructive to look at what stocks have historically done during recessions to get an idea of potential stock market scenarios.

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What a Week for the Stock Market

August 1, 2022
These days a Federal Reserve (Fed) policy meeting alone gets a lot of headlines and has market participants on the edge of their seats. Add to that the second straight quarter of negative gross domestic product (GDP) growth that exacerbated recession fears, the busiest week of earnings season, and important but sometimes under-the-radar inflation data, and last week was epic for market watchers.

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3 Factors That Could Change the Inflation Course

July 25, 2022
In recent months, inflation was lifted by supply bottlenecks, stimulus money, and loose monetary policy. As we navigate the uncharted waters of historically high global inflation, we can best understand the underlying trends by taking an individual look at the various components...

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Managing Market Volatility

July 18, 2022
A global economy that was already vulnerable to inflation from supply chain disruptions, tight labor markets, excess stimulus, and loose monetary policy came under more pressure when Russian aggression in Ukraine added sharply rising commodity prices and put Europe on the brink of recession. The effects have included renewed pressure on interest rates...

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LPL Research: Mid-Year Outlook 2022

July 12, 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. We may not be flying into a storm, but there’s been plenty of turbulence the first part of 2022...

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Constructive, Not Complacent: Lowering S&P 500 Target

July 5, 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...

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Relief At The Pump And For Portfolios

June 27, 2022
Let’s start with the single price that matters to consumers most: gas prices. Even if you drive an electric car, it would be hard not to notice the huge increase in gas prices over the past year. The AAA national average price for a gallon of gasoline just hit $5 for the first time ever...

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Bear Market: Q&A

June 22, 2022
The average bear market since 1950 has seen the S&P 500 lose an average of about 29% (including the near bear markets that saw declines of 19-20%). That suggests that if this bear market ends up around the average, that stocks may drop another 5% or so. 

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Is The 60/40 Portfolio Dead?

June 13, 2022
Bonds have typically seen gains during historical periods of equity volatility, although not always. But low bond yields in 2020 and 2021 and steep bond losses due to rising rates in 2022 have led many to speculate that the 60/40 portfolio is dead. But there’s something of a silver lining in the declines...

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The Economy Is Slowing But Not Shrinking

June 6, 2022
The U.S. economy grew 5.7% in 2021 after contracting by 3.4% the previous year. Last year consumer spending was extremely robust, particularly on consumer goods as consumers were still less inclined to spend on services. Goods spending contributed roughly 2.7 percentage points to the headline growth rate, the highest since 1955. 

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