Market Signals Podcast

It Looks Like a Bull Market

LPL Research

Stocks expand their participation in the market rally as consumers are starting to spend. Value may challenge growth soon, while US-China trade tensions test the economic recovery. Is this the early cycle of a bull market?

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Stocks continue to climb, even as headlines remain concerning. The S&P 500 Index is now more than 35% above the March lows, yet the (unofficial) recession is still in full force, US-China tensions are heightened, and civil unrest is occurring in many US cities. The LPL strategists try to piece together a very confusing backdrop.

US and China tensions grow

The back and forth between the two super powers has continued, as China has increased its control over autonomous Hong Kong. The United States was expected potentially to put sanctions on China or delist Chinese equities here in the United States in retaliation. On Friday, May 29, President Donald Trump gave a tough speech, but there was no talk of delisting, sanctions, increased tariffs, or leaving the existing trade deal. As the LPL strategists note, this was a good sign that calmer heads may prevail.

The great rotation?

Last week some of the more beaten-up assets like value style and small caps did well, while previous leaders like technology and healthcare showed some cracks. LPL Research continues to have a slight bias toward growth style, and we expect the value-style bounce to fizzle out. The good news is that market breadth has expanded nicely, meaning more and more stocks are participating in the rally. In fact, more than 90% of the S&P 500 Index components were recently above their 50-day moving average. As the LPL strategists explain, this is a rare amount of strength, which historically has led to quite bullish results over the ensuing 6 to 12 months.

Are you confused?

More than 30 million people have filed for initial jobless claims in the past 10 weeks (US Bureau of Labor Statistics), we think second quarter gross domestic product (GDP) may be down as much as 50%, and consumer spending has dropped the most in history. Yet, the month of May saw new homes sales and consumer confidence actually increase. As the LPL strategists discuss, the worst likely may be over, and as more and more areas of the country open up, economic data should get better—although in many cases it has nowhere to go but up. Make no mistake about it, this has been one of the most confusing investing backdrops we’ve ever seen.


Chart - Stock market rallies with extremely strong breadth tend to keep going

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 Play, or Spotify.




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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