LPL Research Market Signals Podcast

Weighing Winners and Losers

LPL Research

Stocks continue to gain on hopes of a COVID-19 vaccine, but many economic data points still show weakness. Value-style stocks had a good showing against growth recently. And Q2 earnings may have hit a trough. We look at the winners and the losers.

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Although stocks continue to gain on hopes of a vaccine, the worries are mounting as many high-frequency economic data points are showing weakness. This week, the LPL strategists discuss this, the battle over growth versus value, and the upcoming earnings season.

The economy isn’t as strong as it appears

Last week we saw huge gains in retail sales and industrial production, suggesting the economy is humming right along. Yet, as the LPL strategists note, some of the more real-time economic data—like consumer confidence, electricity use, travel, and restaurant reservations—are showing weakness. Overall, this is what we expected: The second half of 2020 won’t deliver a huge V-shaped recovery, but instead more of a square root- or swoosh-shaped recovery. This means the initial surge off the March lows will be the easy part—the final parts of the economy’s growth will be much more difficult.

Time for value?

Value-style stocks had a historic week versus growth style last week, as many former high-fliers were grounded; yet, areas like industrials, materials, and healthcare all did great. The LPL strategists remain comfortable with a slight growth tilt, but they agree that value does have some appealing aspects to it if the economic recovery surprises to the upside. But at this time, in a low-growth and low-rates world, favoring growth remains our suggestion.

The trough for earnings

Second quarter earnings may hit a trough, with expectations for S&P 500 Index earnings to be down nearly 45% year-over-year, according to FactSet. However, consensus estimates over the past six weeks have been flat, and the LPL strategists think this suggests recent earnings have held firm. It will be an ugly quarter, but the bar is set so low, we expect earnings to comfortably beat the historically poor estimates.

Chart - COVID-19 delivering significant blow to corporate profits


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.  


For Public Use — Tracking #: 1-05034918 (07/21)