The Baton Is Being Passed l LPL Market Signals Podcast

September 16, 2019

In the last week we’ve seen a rotation from growth to value, small caps gaining on large caps, and sovereign debt yields turning down. In short, the leadership baton is being passed around.

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Last week was an interesting week in the stock market. We witnessed a significant rotation from growth to value in equities, and small caps moved ahead in a big way. In a nutshell, we could say what had been our worst performers so far in 2019 came out of their doldrums and showed us what they really can do.

Crude Oil

Crude oil prices had a huge bounce on Monday after attacks on key Saudi Arabian oil facilities over the weekend disrupted production. Historically, big bounces in crude haven't impacted stocks, but this time the bounce is due to geopolitical concerns, and that worries us.

Fed Rate Cuts

The Federal Reserve (Fed) will meet this week, and we’re looking for a 25 basis point (.25%) cut this week and one more later this year.

Negative-Yielding Debt

Globally, the basic premise of fixed income investing has been turned upside down. There’s a growing pile of bonds around the world offering negative yields. We believe the combination of economic fundamentals, domestic monetary policy, and a widening federal budget deficit probably will limit the prospects for sub-zero yields in the United States. We offer more on this in our Weekly Market Commentary: The Curious Case of Negative Yields.

Market Technicals

Market technicals still appear strong. Many equity groups are participating, and this new market leadership should help the overall bull market.

Negative-yielding debt is rapidly becoming the new normal. Given extraordinary global monetary policy initiatives, the basic premise of fixed income investing has been turned upside down. There’s a growing pile of bonds around the world offering negative yields, in which a lender now pays the borrower for the privilege of loaning the borrower money.

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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