Getting Better is Good Enough

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Stocks continue to bounce around with the election right around the corner. With the economy improving and the next stimulus plan likely on hold until after the election, there are many potential drivers to create this pre-election volatility.

More gains are likely

There are growing concerns, but the market breadth has been impressive and higher prices are likely. In fact, stocks moved from oversold to overbought in a very quick timeframe, which historically has suggested future gains. Leadership from the materials and industrials sectors are suggesting a market that is betting on a better economy.

Economy is improving

Initial jobless claims remain stubbornly higher, but many other parts of the economy are improving. In fact, retails sales recently reported another new high, well above expectations. This is another sign the recession is likely over.

Latest on the election

The polls continue to suggest former Vice President Joe Biden is in the lead, but the LPL strategists continue to think this race is much closer than the polls suggest. Equity strength and US dollar weakness historically have been signs the incumbent president would win. Although there are many different factors this year, we wouldn’t ignore history. Finally, another stimulus plan is unlikely before the election, but this is 2020—so anything is possible.

We like small caps

LPL Research recently upgraded its view on small cap stocks, as early in economic cycles we often have seen strength out of small caps. As the economy comes back online, we see potentially explosive earnings growth from small caps in 2021, and this is an area where investors might consider adding.

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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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