100 Market Signals and Counting
The S&P 500 Index sell-off continued, although some sectors held up well. Historically, it may have hit its peak for an election year. The dovish Federal Reserve underlines fiscal stimulus, and the US dollar tracks the election.
The sell-off continued last week and election talk is heating up. This week in the LPL Market Signals podcast, LPL strategists discuss what it all means.
3 in a row
Stocks fell again last week, causing the S&P 500 Index to drop three consecutive weeks for the first time this year—and the first time in nearly a year. What’s interesting, though, is that some sectors and classes held up quite well. Materials, small caps, and industrials all have performed well, while large cap technology continued to weaken from historically overbought levels.
The Fed decision
The Federal Reserve (Fed) remains quite dovish, as it reiterated at the conclusion of its Federal Open Market Committee (FOMC) meeting September 15–16. The LPL strategists explain there was no talk of the balance sheet, and this could have sparked some of the recent weakness, although the Fed was quick to note that more fiscal stimulus is needed. At this point, we’re still expecting a fiscal deal from Congress before the election, but it isn’t a given.
With the election nearing, the LPL strategists note that historically the US dollar has done a great job of predicting the potential winner or loser. If the dollar has been higher prior to the election, the incumbent party has tended to lose. Conversely, if the dollar has been weak, the incumbent party has tended to win. Strategists also discuss whether presidential nominee Joe Biden’s proposed tax plan could impact corporate earnings per share (EPS) next year, but there also are some potential positives in green energy and infrastructure spending that could be underreported.
Tune in now
Listen to the entire podcast to get the LPL strategists’ views and insights on current market trends in the US and global economies. To listen to previous podcasts go to Market Signals podcast. You can subscribe to Market Signals on iTunes, Google Play, or Spotify.
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References to markets, asset classes, and sectors are generally regarding the corresponding market index. All indexes are unmanaged and cannot be invested into directly. Index performance is not indicative of the performance of any investment and do not reflect fees, expenses, or sales charges. All performance referenced is historical and is no guarantee of future results.
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All index data is from FactSet.
All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy.
This Research material was prepared by LPL Financial, LLC.
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