The S&P 500 Index finally made new highs and the economy continues to improve. This week in the LPL Market Signals podcast, the LPL strategists discuss the new highs and what worries them. On the heels of the Democratic convention, they also dissect a potential Joe Biden victory.
The S&P 500 finally made new highs, erasing the 34% bear market in record time. In fact, as the strategists note, it took only five months for stocks to come all the way back to new highs, one of the fastest recoveries ever—and the fastest recovery for a 30% decline or more. The good news is that future returns after more than five months without a new high historically have been quite strong.
What would a Joe Biden victory mean?
The LPL strategists discuss a potential Biden victory (and next week will discuss a potential President Donald Trump win). The big concerns regarding a Biden win are much higher taxes and more regulation. The strategists note that with the economy coming off a vicious recession, it would be tough to enact all of the proposed tax hikes. Additionally, it might take a Democratic sweep in the Senate to make major tax changes—and that isn’t a sure thing right now. Last, green energy and infrastructure might benefit from a win, while financials and healthcare may struggle.
What worries us
The incredible rally continues, but some near-term worries are mounting. The LPL strategists note many signs of sentiment are getting frothy at the same time the market is pricing in a vaccine, and this could lead to disappointment. Although this bull market is alive and well, some volatility over the coming months may be likely.
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.
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.
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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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