The U.S. continues to lead globally on not only economic growth but also economic momentum and you can say the same thing about earnings as well.- Jeff Buchbinder - Equity Strategist for LPL Financial
The LPL strategists noted that the Fed Chair managed to change market worries about a flattening curve to a steepening curve in his speech. Inflation is hovering around the two percent annual pace that the central bank regards as optimal while the unemployment rate has remained close to four percent. That contrasts the Phillips curve model embraced by some economists in which low unemployment is considered a harbinger of higher inflation.
Fears of rising rates did weigh on investors’ minds, nonetheless, as US equity prices dropped from near-record levels last week and the jobs report was slightly weaker than expected. However, the LPL strategists pointed out that rising yields are typically good for stocks over time as they signal stronger growth rather than runaway inflation, and the slowdown in jobs can be attributed to the effects of Hurricane Florence.
As one of the largest credit markets, Italy is still a concern yet the global market remains solid. Despite weak stock market performance year to date, emerging markets look promising. A stronger dollar, moderating Chinese demand, and US-China trade tensions have weighed on the group, but the LPL strategists cite factors such as the globalization of manufacturing and services providing economic and market tailwinds going forward.
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