Is This the Start of a Larger Correction?

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Thursday, June 11 saw the S&P 500 Index drop nearly 6% and with fears over a second wave spiking; this very well could be the start of the long-awaited correction. This week, the LPL Strategists discuss the near-term and what stocks could do the rest of 2020.

More pain to come?

The S&P 500 added a record 44.5% the 53 days after the March 23, 2020 lows, besting even the initial bounce off the March 2009 lows. Worries over a second wave of COVID-19, over-the-top bullish small traders, and various sentiment measures flashing warnings are all likely contributing to this recent weakness. The LPL Strategists have been anticipating a pullback, and this one very well could have further to go before a low is in place.

Fed round-up

The Federal Reserve left rates unchanged, but did give a dourer economic outlook during the Q&A session. Adding to the mystery is inflation, which saw core Consumer Price Index (CPI) negative three months in a row for the first time ever. The LPL Strategists discuss why deflation might be in the news, but likely future inflation is what could be more of a worry.

Where do stocks go now?

The average recession sees earnings drop 25%, and that is right about where things have dropped so far during this recession. The LPL Strategists discuss potential base, bull, and bear cases for the S&P 500 for the rest of this year; so much does hinge on how the fight with COVID-19 goes. LPL’s year-end target range remains 3,150-3,200. Stocks have likely come too far too fast in the short term, but for long-term investors, stocks are still more attractive than bonds.

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 iTunes, Google Play, or Spotify.

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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.

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.

The Standard & Poor’s 500 Index is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.

The source for the unemployment numbers discussed in this podcast is the US Department of Labor.

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. 

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