LPL Financial Market Signals Podcast

Oil, Markets, and Momentum l LPL Market Signals Podcast

LPL Research

Oil prices went into the negative, but we may see prices coming back up soon. The stock market rallied 22% in 20 days, possibly signaling bullish signs. This earnings season promises to be unprecedented and unpredictable.

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Crude oil crashed, yet stocks held in there last week. In fact, it was one of the best one-month rallies ever, which could actually mean market strength may continue. Also, we are in the heart of earnings season, and so far, it is off to a rough start.

What happened to oil

Lower oil prices help the consumer, but it hurts the energy companies. As the LPL strategists discuss, this is a unique situation and one we probably didn’t expect to see in our lifetime. Negative crude oil prices resulted from limited demand and a function of the way futures contracts work, coupled with no one wanting to hold physical oil because of limited places to store it.

Best 20-day rally

The LPL strategists noted the rally off the March 23 lows is historic, up more than 22% in 20 days, for the second-best one-month return since WWII. When we look at other times stocks were up big over a one-month period, we find the future returns were quite strong. In fact, a year after the one-month rallies, the S&P 500 Index was higher 10 out of 10 times. As the LPL strategists discuss, near term a pullback is perfectly warranted, but when looking at the bigger picture, this could be a bullish sign for stocks.

Earnings season update

Second quarter earnings are now expected to be down close to 30% from positive estimates just a few months ago. As the LPL strategists discuss, first quarter earnings could be down by mid-teen percentages, and earnings may likely go into a trough in Q2 before beginning to improve the second half of this year. Estimates for the next four quarters have been cut by 13% in April. The big improvement in earnings most likely will be in 2021 as the economy gets back online.

Oil prices negative for May delivery only

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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.

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.


For Public Use — Tracking #: 1-978151