LPL Financial Market Signals Podcast

More Gains Possible After 19% S&P 500 Rally │ LPL Market Signals Podcast

February 25, 2019

LPL Research

This week’s Market Signals podcast focuses on the possibility of more gains after a 19% S&P 500 Rally.

The global economy is weakening, but the global economy has never led the US into recession.

- John Lynch – LPL Chief Investment Strategist

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In this week’s Market Signals podcast, our Research strategists discuss some of the most frequently asked questions they’ve received after the 19% rally in the S&P 500 that followed the December 24 lows.

The big question: can stocks really go higher?

The LPL strategists cite many reasons to think the bull market is alive and well. Earnings are better than expected with a more dovish Fed doing much of the lifting. However, the easy part of the rally has occurred; the next 10% rally will likely be more difficult.

High valuations are common worry. But factoring in historically low inflation and interest rates, the strategists say they don’t necessarily see valuations as being high. By some measures, they may even be considered cheap.

Overall market breadth is strong, which means many stocks are participating in the rally. That’s a healthy backdrop for continued gains over the longer term.

Some of the recent economic data has been weak, but the strategists don’t see this as the beginnings of a recession. Instead, it’s likely weakness coming off the huge fourth quarter sell-off and volatile economic data courtesy of the government shutdown.

Chart - More than 90% of S&P 500 Components Above 50-day moving average may mean strong equity returns


Stocks are historically overbought after the huge rally since December 24. Here’s the good news, very overbought markets can actually continue to outperform. Per the above chart, when more than 90% of the components in the S&P 500 are above their 50-day moving average and the future returns have been quite impressive.

Catch this week’s Market Signal podcast for more in-depth market insights. To make sure you don’t miss any Market Signals podcasts, subscribe to the series on iTunesGoogle PlaySpotify, or wherever you get your podcasts.

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The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual security. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. The economic forecasts set forth in this material may not develop as predicted.

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This research material has been prepared by LPL Financial LLC.

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