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In the latest LPL Market Signals podcast, the strategists discuss whether bearish market sentiment is actually bullish, posit that earnings season pessimism is overdone, and highlight some reassuring data points on inflation.

Bearish sentiment may actually be bullish. The strategists note that sentiment by some measures is at levels of pessimism not reached in decades. For example, the Bank of America Global Fund Manager Survey for July highlighted the highest cash levels for active managers since 2001 and even greater levels of risk aversion than in 2000, 2008, or 2020.

Earnings pessimism may be overdone. Pessimism is high as second quarter earnings season begins, which may enable stocks to respond positively to softening results. Not surprisingly, results thus far have been mixed with lower percentages of earnings beats than in recent quarters and generally lower amounts of upside given slower economic growth, cost pressures, and a strong U.S. dollar. However, stocks have responded positively to earnings misses as well as beats thus far, suggesting a more moderate earnings outlook may already be priced in.

Light at the end of the inflation tunnel. The June increase in the Consumer Price Index was awful at over 9% year over year. However, that backward looking report did not reflect recent weakness in commodities prices, notably oil, copper, and grains. The strategists also noted that recent survey data reflects falling inflation expectations, which suggest a peak may be in. Keep in mind the mix of inflation has tilted more toward the demand side, which the Fed can control, and away from the supply side, which the Fed cannot control. This bodes well for the inflation fight going forward.

What to watch the rest of the week. Besides a flurry of earnings reports, this week’s economic calendar includes key housing data and purchasing manager’s data from S&P Global. This week also brings central bank meetings in Europe and Japan that may help slow the dollar’s ascent.

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Listen to the entire podcast to get the LPL strategists’ views and insights on current market trends in the U.S. 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.

Stock investing includes risks, including fluctuating prices and loss of principal. Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise and bonds are subject to availability and change in price.

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 and Poor's 500, or simply the S&P 500, is a stock market index tracking the performance of 500 large companies listed on stock exchanges in the United States.

The Bloomberg U.S. Aggregate Bond Index, or the Agg, is a broad base, market capitalization-weighted bond market index representing intermediate term investment grade bonds traded in the United States.

All index data is from FactSet.

The Consumer Price Index (CPI) is a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services.

Core CPI is a subset of the total Consumer Price Index (CPI) that excludes the highly volatile food and energy prices. It is released by the Bureau of Labor Statistics around the middle of each month. Compare to Personal Consumption Expenditures (PCE); Core PPI; Producer Price Index (PPI).

Personal consumption expenditures (PCE) is a measure of price changes in consumer goods and services released monthly by the Bureau of Economic Analysis (BEA). Personal consumption expenditures consist of the actual and imputed expenditures of households; the measure includes data pertaining to durables, nondurables, and services. It is essentially a measure of goods and services targeted toward individuals and consumed by individuals.

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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