LPL Research Market Signals Podcast

The Bull Market Turns One

LPL Research

LPL Research consider what could be in store for stocks in year two of the bull market, along with a discussion of rates and the latest Federal Reserve meeting.

Subscribe to the Market Signals podcast series on iTunesGoogle Podcasts, or Spotify and find us on the LPL Research YouTube channel.
 

 

A year ago this week the stock market bottomed and thus ended one of the most vicious bear markets of all time. This week, LPL Financial Chief Market Strategist Ryan Detrick and Equity Strategist Jeff Buchbinder discuss what could be in store for stocks in year two of the bull market, along with a discussion of rates and the latest Federal Reserve (Fed) meeting.

The Bull Hits Year Two

Incredibly, the S&P 500 Index bottomed a year ago this week, marking the best start to a bull market ever, up approximately 75%. Ryan and Jeff discuss why investors should be on the lookout for continued gains in year two. As shown below, after 30% bear markets, stocks have never been lower during year two and are up nearly 17% on average. Of course, it likely won’t be a smooth ride, as a 10% correction is the average pullback seen during year two.

Chart - New Bull Markets Historically Build on Year One Gains in Year Two

Rough start for bonds

The huge surge in yields have greatly impacted bonds, with 20-year Treasuries taking the brunt of the weakness, down 20% from their late August peak. Ryan and Jeff note they have recommended being underweight longer-term bonds, as higher rates were likely in 2020 and higher rates impact longer-term bonds more. Now that higher rates have played out, potentially looking to add a little more duration to your bond holdings makes sense. Lastly, the 10-year yield was recently above 1.7% and the Strategists don’t expect a move much above 2% in 2021.

Fed Update

The Federal Reserve (Fed) left rates unchanged at their latest meeting, and really didn’t say anything we didn’t expect. The bottom line is the Fed will likely leave rates near 0% until after 2023 and this tailwind will continue to support equities. Ryan and Jeff explore the question: What if the Fed is wrong and behind the eight ball? If they should hike rates sooner but don’t, higher inflation will likely be the fallout from this potential policy mistake. Of course, many of the functions that kept a lid on inflation the past few decade—things like globalization, automation, and the Amazon effect—are all still firmly in place, so LPL Research isn’t concerned with massive inflation down the road at this time.

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 iTunesGoogle Podcasts, or Spotify and find us on the LPL Research YouTube channel.

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IMPORTANT DISCLOSURES

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. 

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For Public Use — Tracking #: 1-05124052 (03/22)