Yield Spike Spooks Stock Investors
LPL Research discusses whether the recent surge in yields may continue to impact stock prices, the record breaking earnings season, and updates from the Fed.
Rates Go Boom
Yields jumped last year as expectations of a surging economy and higher inflation dominated conversation. As a result, bonds are off to one of their worst starts to a year ever, while growth stocks (and other higher valued stocks) were hit quite hard. Chief Market Strategist Ryan Detrick and Equity Strategist Jeffrey Buchbinder discuss why historically, higher rates have actually been bullish for stocks, which is something nearly no one is pointing out right now. The real winner from a higher growth and higher rates world would be cyclical values stocks, things like materials, industrials, and financials.
Earnings Season Goes Boom
It was an amazing show from corporate America this fourth quarter earnings season, as more than 80% of companies in the S&P 500 Index beat earnings expectations, while their views on the future were quite bright, as full 2021 growth estimates rose to 24% from only 16% a few months ago. The LPL Strategists noted that 2021 earnings are expected to be as much as 7% above the 2019 peak, something that nearly no one expected in late 2020.
Economic Data Continues to Boom, is Inflation Next?
Last week saw better than expected consumer confidence, housing data, durable goods data, and personal income. Not to mention we now have a third vaccine approved to fight COVID-19, all adding up to a quickly improving economy, faster than most expected. Although inflation worries are mounting, at this time Ryan and Jeff don’t see a major shift taking place in higher prices and this move higher is likely transitory.
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 Podcasts, or Spotify and find us on the LPL Research YouTube channel.
This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks including possible loss of principal. Any economic forecasts set forth in the podcast may not develop as predicted and are subject to change.
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.
Any company names noted herein are for educational purposes only and not an indication of trading intent or a solicitation of their products or services. LPL Financial doesn’t provide research on individual equities. All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy.
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.
For Public Use — Tracking #: 1-05116214 (03/22)