LPL Research Market Signals Podcast

Stocks, Seasonality, and Sentiment

LPL Research

Stocks continue to show strength, with the small cap Russell 2000 Index hitting new highs. The economy may be sending signs of a slowdown while we wait on COVID-19 vaccines. Seasonality is strong, and sentiment is frothy.

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Stocks are off to a historic rise in November, but there are some cracks in the armor. Economic data is slowing, COVID-19 cases are spiking, and overall sentiment is quite frothy. What does it all mean as we move into a seasonally strong part of the year.

More arguing

The US Treasury has requested that the Federal Reserve (Fed) return $455 billion in unused funds to be used for lending facilities. Fed Chair Jerome Powell made his opposition known, but it may not be as big a deal as the media makes it. For starters, the money will go to Congress to be appropriated, likely to help small businesses via the Paycheck Protection Program (PPP). Also, the Fed can ask for the funds again in the future, if the economy weakens.

Economy is slowing

Somewhat disappointing data from retail sales and the Leading Economic Index (LEI) suggest the economy is beginning to slow, although it is still growing. With various COVID-19 restrictions being enacted, some economic weakness or slowdown makes sense over the next few months until a vaccine is widely available.

Sentiment is worrisome

With stocks seeing a record run in November, one worry is that overall sentiment is getting frothy. An increase in optimism could open the door for some weakness or at least consolidation. From sentiment polls to fund flows and put/call ratios, we are seeing some warning signs that being bullish isn’t very lonely anymore.


Chart - Leading Indicators Suggest Moderating Economic Growth

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 Podcasts, or Spotify and find us on the LPL Research YouTube channel.




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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