How Much Further Will The Stock Market Slide Go?

Last Edited by: LPL Research

Last Updated: August 23, 2022

How Much Further Will The Stock Market Slide Go?

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Podcast intro:

From LPL Financial, welcome to Market Signals.

Jeff Buchbinder:

Hello everyone. Welcome to the latest edition of LPL Market Signals. Jeff Buchbinder here with you and with my friend and colleague, Quincy Krosby. Quincy, how are you today?

Quincy Krosby:

Fine, Jeff. Thanks so much for inviting me. I appreciate it.

Jeff Buchbinder:

My pleasure. Glad to have you with us. I'm especially glad you're with us because we have a little bit of an international flavor to the podcast today. We're going to talk quite a bit about Europe. Mm-Hmm. <Affirmative> and certainly we're going to talk Fed too, because Jackson Hole's coming up. And I know those are two areas where you certainly have a lot of expertise. So, let's get to it. It is August 23. We're recording this Tuesday morning, and thankfully stocks are hanging in there today, pretty flattish after the big drops on Friday and Monday. So, here's our agenda for today. We've got four topics. First, how much further might this slide go? We're down about 4% from the top. So not much of a slide, but it is a little bit of a slide. Second, quick housing update.

 

That was the topic of our Weekly Market Commentary for this week, available in lpl.com, authored by our Chief Economist, Jeffrey Roach. Third, Europe's energy crisis is worsening. So, we'll talk Europe. And then lastly, Jackson Hole preview. So, how much further might this slide go? I think this is appropriate given it is late August and folks are taking their summer vacations with their families. So, we've got a water slide here. This certainly has a lot of twists and turns, which this market no doubt has had. So, turning from one slide to another, certainly more modest slide thus far. We are down about 4% from the recent high. And, you know, the market rolled over at a convenient spot, right at that 200-day moving average. It was almost like everybody was watching for it at the same time. Call it a self-fulfilling prophecy. So, Quincy I mean, first, you know, a lot of people don't really believe in technicals. So, you know, the question is should this, you know, be a reason for investors to think that maybe we'll get support at the 50-day, right? If people were watching the 200-day and stocks followed that by reversing lower, might we rebound and move back higher again at the 50-day, which is 3,969? Or do we even go that far down?

Quincy Krosby:

Well, I think so much depends on the comments from Chairman Powell. It's extremely important, even if he doesn't address the issues that the market wants to learn about or hear about. He said he's data dependent, but nonetheless it is going to be very important. The market's going to move, currencies are going to move and the market's going to move. One thing about the 200-day, Jeff, that's an area that is watched very closely by institutional money managers. Certainly, they're not technicians, but they keep their eye on the 200-day. And this is important for the market because when institutional money managers come into the market it is going to be powerful. I have a sneaking suspicion that they did come in despite their misgivings because we know that they tend to be bearish right now. But I think they were coming in, they have fear of missing out. But when they come in it is going to be the market's going to be underpinned by a tremendous amount of volume. The 200-day is crucial and everybody becomes a technician when there's uncertainty.

Jeff Buchbinder:

No doubt. Yeah. So, not only do we want to see the S&P 500 break above the 200-day, we want to see that 200-day sloping upwards. So, we've got some work to do. Hopefully the Fed's message will comfort the market and stocks can turn around. Our technical folks think maybe 3,900 is where the support will be. We'll see if we go down that far, but certainly we have to get through 3,969. Exactly on the downside, the 50-day first. So, we gave a couple of you know, technical reasons why we thought the bull market had begun. We certainly won't know until we go back up 20%. But although some people say we have to go back to a new high, at any rate we talked about the 50% retracement, which we did, which is a positive sign.

 

We also talked about this breadth surge. And so, I wanted to put these numbers in. This is from a blog we did late last week on LPLresearch.com. When historically we've gotten these breadth surges, at least over the last 30 years, you've seen really, really strong performance from the S&P 500 subsequent to that, these numbers come from Bespoke Investment Group. And you see, after we get these big surges where over 90% of the S&P 500 is above the 50-day moving average you get on average an 18% gain over the next year. And, you know, that's obviously a very strong gain. But perhaps even more impressive is you're up 15 out of 16 cases here. Right? So, I mean, the odds that were up in a year, at least based on this study, it's just one study.

 

Sample size isn't huge, but odds that we're up in a year are pretty good and actually good returns in the near term too. Three months, six months, 12 months, you know, up an average of 6%, basically 9%, and then at 18% with very, very high batting averages. So, this tells us that this market has some early cycle, early bull market characteristics mm-hmm. <Affirmative> They could push us higher. I also want to draw this 2011 comparison, which I think is interesting to point out that, you know, even though we think a new bull market has begun that doesn't necessarily mean that we're not going to have any volatility. And so, 2011 is instructive in that regard because, you know, we had a breadth surge in October hitting that 90% trigger, and then in November stocks pulled back 10%. In fact, we saw the same 17% rally in October of 2011 that we just saw coming off of the June lows before that correction. So, you know, Quincy, do you think we could pull back 10% or is that maybe a little too aggressive given the given the landscape?

Quincy Krosby:

Again, so much depends on, you know, how the Fed attempts to curtail inflation and bring us to price stability. But one thing that, you know, is important with the pullbacks, it makes the market more attractive in terms of valuation. You know, when the market has those surges, just the last surge, suddenly the bar is higher in terms of what the market expects from corporations, companies in their earnings, especially if they're in a sector such as technology where the valuations climbed very quickly, much higher. So, you want to see the market pull back. You want to see the market digest the gains, the valuation for the overall market on a, you know, forward 12 month forward pullback because that brings us to a level when we go through the next earnings season, you know, the bar is not as high. It doesn't have to be perfection in order to keep the market gains.

Jeff Buchbinder:

Yeah, it's a good point. You know, the P/E ratio of the S&P 500 is back up near 18. Exactly. So, the bar is certainly higher. We've lost the ability for earnings season to drive us higher. Mm-Hmm. <Affirmative> in fact you know, we've looked at performance of the stock market in and out of earnings season in the past, and you tend to see stocks do better during earnings season as opposed to outside of earnings season. So, we're kind of following that that playbook right now. So let, let's turn to our next segment, which is housing, again, the topic of our Weekly Market Commentary. This is important to all of us. You know, because certainly most of us own homes and many of us certainly are renting and looking for homes. It's important because it provides us for the place to live, obviously, but it's also important because there's a wealth effect, right?

 

The house that folks own is their biggest asset for the most part. And certainly, based on the change in home prices, it can affect people's confidence, their willingness to spend. So, we certainly pay close attention to the housing market, even though it's not a huge percentage of GDP. So, we've got three housing charts here. The first one, existing home sales plummet as rates rose. This is no surprise to any of you, when interest rates move so much higher in a short period of time, that of course affects the housing market quite a bit. So, this is a big decline. You can just see it in this chart. To give you the numbers specifically, we had a 5.9% drop in existing home sales in July. Actually, new home sales are being reported in just a few minutes.

 

That's the biggest one month drop since February. And it is the sixth straight decline. And contract closings fell to an annualized 4.81 million, lowest level since May 2020. Right. We know there wasn't a whole lot of housing activity in May 2020 for obvious reasons. And then if you take out the pandemic, this is the lowest level of existing home sales since 2015. So, there's no doubt that the housing market has slowed. But Quincy, this is really interesting. I found, you know, that inventories are so low, still mm-hmm. <Affirmative> and you see that on this chart, the blue line is the months of supply, only three months supply. So, inventory is so low. So, even though the housing market has dramatically slowed, even though mortgage rates have surged higher, the average day on the market, average number of days on the market for a home in July was only 14 days. Mm-Hmm. <affirmative>, that to me is remarkable. And not only that, that was down year over year from 17 days mm-hmm. <Affirmative> a year ago. So, you know, even though activity is down, people who are trying to sell a house, they're actually not in a bad place right now.

Quincy Krosby:

No. And, you know, they're cutting prices. It always worked out over the years, over decades, interest rates go up, prices come down, and so many have to lower the prices. Many of the expectations are coming down. But, you know, Jeff, the cancellations, that's what I'm paying attention to. The number of canceled deals is just skyrocketing. It's surging from just, you know, a couple of a month ago or so, this is telling you that Americans, I think, are afraid about one thing, about their jobs. Because when you are worried about whether or not you're going to keep your job, you don't want to take on any debt, even if it's an attractive price for the house, you don't want to take on any extra debt, you become much more cautious. And so, as you see these headlines of name companies letting folks go, it tends to spread through the economy. And it tends to scare people. They don't want to be the next one, you know, being told that they're being let go. And that, I think has to do with the high, very high cancellation rate.

Jeff Buchbinder:

So, you're saying that Elon Musk isn't the only one trying to get out of a purchase?

Quincy Krosby:

No, no. Not just Elon Musk. And they don't have the same ability to sell other stock. And the foot traffic has also come down, you know, at least initially we heard from some of the high-end builders, well, you know, when the Fed began raising rates and they said, oh, you know, foot traffic is good, although they're not signing contracts. They're talking, but they're leaving and now foot traffic is down too.

Jeff Buchbinder:

Yes. And so, you know, based on that, the housing market will probably continue to slow. We'll have you know, a little bit of a drag on GDP from the housing investment, you know, residential investment component probably in the second half of the year. Not dramatically. I think it's like three, 4% of GDP is housing construction is very low. Right. So, we're not talking about you know, something that's going to be the difference between recession or no recession. But nonetheless, housing will continue slow and remember that the Fed tightening works with a lag. Yes. Right? And so, you know, the tightening that they've already done is probably not going to be fully felt for several more months. So, more slowing for housing coming. Not a particularly positive story, but the low inventory and you know, quick speed to close is certainly a positive story.

 

This is an interesting piece that Jeff Roach put in the Weekly Market Commentary as well, about the he calls it the great reshuffle, right? Mm-Hmm. <Affirmative>. And so, you know, during the pandemic, of course, many people have had more geographic flexibility mm-hmm. <Affirmative>, so they have left, in many cases, left the west and the northeast and gone to the south. So, the south though has certainly seen a lot less activity lately. But you certainly have a lot more sales in the south, as you can see here from this top orange line sales in the south, well ahead of those in the you know, the rest of the country. But they've come back down. And so maybe this is sort of normalization mm-hmm. <Affirmative> people, you know, why are people moving? Well, they can for one, two, certainly lower taxes and third lower cost of living. And in an inflation environment like this, Quincy certainly moving to a place that has a cheaper cost of living is very attractive to many folks, especially if they don't have to commute into Manhattan five days a week.

Quincy Krosby:

That was my life. Yes.

Jeff Buchbinder:

<Laugh>. Yes. I lived in Manhattan, so I'd had a short commute to Manhattan <laugh> when I was there, but that is certainly a big cost. And you're even seeing some talk of commuter cost reimbursement, right? Yes. To get employees back into the office. Yes. You know, just pay for the train pass. Yes. So, we'll see if that goes anywhere. But you are seeing more and more companies trying to get employees back to the office, and that's certainly something that I am planning to do before too long. So, let's go to our next segment before we close with Jackson Hole and Quincy, this is certainly a map, you know, very well with all of your international travel. You know, Europe, I you know, certainly what's going on in Ukraine is tragic, you know, devastating.

 

But if you look at the economic performance of core, Eurozone, actually has been okay to date <laugh>. Right? I mean, I've been, you know, we've been calling for a European recession really all year, and it hasn't happened yet. It probably will happen. Yeah. Yeah. But you know, right now the European economic data actually is decent. So, I'll give the Europeans credit you know, for hanging in there. But, you know, recession's probably coming. And you know, the big reason why is, you know, Germany's natural gas problem. Right? And so, what has that done? I mean, it's broader than just German natural gas, but look at this chart of Germany's electricity prices. You know, I've been in this business or following the markets for like 30 years, and I can guarantee you I've never looked at German electricity prices on Bloomberg. So, this is a first <laugh>, and wow. I mean, this thing is parabolic. So, you know, the way I interpret this, unfortunately, Quincy, because, you know, the Ukraine ceasefire doesn't appear to be coming anytime soon, is things are just going to get worse over there.

Quincy Krosby:

Yeah. I mean, you know, sometimes some of the European countries that still have nuclear power, you know, they're trying to keep those alive a bit longer, even though there were plans to close them down. Nord Stream 1 right now is on maintenance again. This is the pipeline from Russia. This is the gas pipeline, not oil, but gas pipeline. The question is, you know, did they come back again? Did they come back 20% the way they did when they shut down from maintenance earlier? It's a difficult situation. And you couple that with the European Central Bank trying to curtail inflation by raising rates. So, you know, they've had one rate hike, which is 50 basis points. The question is, right now what happens? The difficulty for the ECB is, and it is mandated that you cannot have inflation go above 2%.

 

It's not a, you know, oh, maybe, not maybe, the question is what does Christine Lagarde and the board do? One of the expectations are that there will be another rate hike. But again, just like here, it takes a while for it to work its way into the economies as you have higher rates. But this exacerbates dramatically the problem, particularly for Germany. The other thing is right now you have a major port, a deep, deep water port in Germany, part of the global supply chain, under pressure, there are potential strikes going on, there's a heat wave, you name it. And then there's also the Europeans relationship with China, may have a very strong trade relationship with China. And yet you have China demand actually down because Beijing is trying to stimulate demand in you know, within China.

 

So again, they're being hit from all sides. That said, it's also a nation, as you well know, Jeff, of small business owners and, you know, small business owners, despite what's going on in the bigger scheme of things try to make do, and we'll see if that happens in Germany. I'm watching the banks in Europe because the banks tell an important story about the economies in Europe. There are many banks and in some cases the banks make up the majority of some of the indexes in the respective countries. So, I'm watching that very, very closely. But this story, as you said, is unfolding. It's difficult. One bit of good news, if you want to call it good news, because the reasons are not necessarily good, is that the Euro has weakened dramatically decades low against the U.S. dollar. For tourists, obviously, it's a good thing from the U.S. going over to Europe. And it will help their exports as long as demand picks up. But the question really is what's the next move for the for the ECB in terms of their rate hike campaign, and of course, what happens in Jackson Hole? What does Chairman Powell say? Because that will also affect the dynamic between the euro and the U.S. dollar.

Jeff Buchbinder:

Yeah, absolutely. Dramatic move in currencies, which, you know, helps do a little bit of the Fed's job, right?

Quincy Krosby:

Yes, exactly, tightening.

Jeff Buchbinder:

Puts a little down, yeah, tightens financial conditions, puts a little bit of downward pressure on mm-hmm. <Affirmative> inflation because we, you know, we're buying so much stuff from countries with depreciating currencies. Exactly. So yeah, a lot of reasons why the dollar matters. I also you know, think it's interesting, in a bad way, <laugh>, how high inflation is in the U.K. now. Mm-Hmm. <Affirmative> I think Germany's inflation is around 10%, which is not dramatically higher than where the U.S. just peaked. Mm-Hmm. <Affirmative> likely peaked. U.K. inflation. I saw a forecast this morning that it may get as high as 18%.

Quincy Krosby:

Yes. Yes. And if you read the Bank of England report when they raised rates and talked about I mean, the report was so dismal, it in and of itself about deep recession, the difficulty in you know, curtailing inflation. It made for an incredibly, as one commentator mentioned, it was as if Eeyore wrote the report. Those of you who don't know he is the one that in Winnie the Pooh that said, "My birthday, whoa, that's not a happy day. What, why are you saying it's so happy?" It was really dismal and, you know, they're going to have a new leader. It's probably Truss coming in as the head of the party, she's got her hands full in terms of working through what the Bank of England has projected. It's dismal.

Jeff Buchbinder:

No doubt. No doubt. So, you know, for those who maybe have you know, heavier investments in Europe than they like, you know, we would consider maybe paring those positions back. Because boy, things are getting really tough over there. We'll hope for some good news mm-hmm. <Affirmative> in the form of a ceasefire, but they're getting really tough. And that, of course is in sharp contrast with the U.S. where I mean, I had to read this twice to even believe it. Today is the 70th day that the average national price of gas is down. 70th consecutive day. Mm-Hmm. <affirmative>. That is unbelievable. And I had thought before I looked into it that that would be a record, but it's actually not. In, I think it was 2018, we had, it was somewhere around there.

 

It was late last decade. We had a streak of over 110 days of mm-hmm. <Affirmative>, 110 straight days of gas prices coming down, which is just unbelievable. So certainly the U.S.'s energy independence is a very good thing right now given what's going on in Europe. And that should allow our economy to grow faster, at least in 2023, even though our economy actually is not growing faster right now, relative to Europe. So, let's close that out and do Jackson Hole. So, Quincy, you're one of our star Fed watchers, so I'll certainly look to you to tell me what to look for. I mean, my bias is certainly that it's going to be hawkish and that, you know, Powell will reiterate a lot of the same things he's been saying right, in recent weeks. But what do you think, what should investors be watching and what do you think the reaction might be to what we get?

Quincy Krosby:

Well, yeah, I mean, you know, just as we always say about consumer sentiment reports, let's see what the consumer does rather than what they say. He's going to mention price stability. I don't know how many times, I don't know how many more times he can use that term, but it is the Fed's mandate. And the issue for the market, I think believes, believes that the Fed does want to go towards price stability and not leave us in a stagflationary environment. The question is how do they get there? And this is the interesting part is does he allude to the possibility that the market seems to be pricing in that we go into 2023 with rate hikes, but that the rate hikes become smaller and smaller, especially as quantitative tightening is taking place. And as you've said, you know, it works with a lag, in any event. You have had 75 basis points, 50 basis points it works with a lag, but that you go smaller doses of the medicine and even go into 2023.

 

I don't know if he's going to be that specific. He has said we want to be data dependent. They meet September 20, 21, but just before he speaks, which is 10 o'clock eastern on Friday morning, the PCE report comes out in the morning, the Personal Consumption Expenditures Index, that is going to give him a good idea of where inflation is headed. And typically, that tends to be a little bit cooler than the CPI, the Consumer Price Index. And so perhaps he'll have a, you know, a more upbeat report. Maybe he'll use the term plateau, that inflation is plateauing. I don't know what that does to the market, but I think it sounds good. I don't know if he'll use the term peak, but he may say plateauing, it's easing. That would be very helpful for the market. And obviously, the market's trying to glean any sense of what the Fed is proposing, not just for the September meeting, but past the September meeting and even, you know, going into 2023, that will move the markets.

 

You know, look, the algorithms are going to get there first. They know exactly, they did this with Chairman Bernanke. I will never forget that. The market was down, down, down, and the minute Bernanke made the comment, the algorithms shot in and the market just climbed higher. So, we'll see what happens. But he wants to be careful because, I think they were wounded by what happened and caught off guard when they had to go in a blackout period and change from 50 basis points to 75 and call up the media and just a couple of days before the Fed meeting. He doesn't want to be boxed in. Nonetheless, I'll end with this. The Fed is caught between a rock and a hard place. Some of the inflation is increasingly entrenched and they have to break that. And it is rents, it is wages and it is to some degree, it is oil.

 

So you mentioned oil prices coming down. I just listened to the energy minister from Saudi Arabia. You know, they made a fortune, Saudi Aramco made a fortune recently, obviously with oil prices. But this is what he said just overnight. He said, you know there's some volatility in the oil market. We need to stabilize it. Perhaps we need to cut production. That is not what the market wants to hear. So, the oil market does because it pushes the price up, but not what the Fed wants to hear. So, in other words, there are so many variables going into this, but again, the good news is he will have that report. It will come out before he speaks at 10 o'clock Eastern. That report, but whatever he says, a scintilla of projection is going to move the market, which direction we don't know.

 

But I agree with you, Jeff. The rhetoric is going to be hawkish because it will follow the rhetoric from the Fed speakers who came out right after the Fed meeting, after the market interpreted the minutes in a dovish tone. They came right out. All of them, some of them dovish themselves, but came out and said, uhuh, we are not finished with the job. We are moving towards price stability and market get ready. I mean, that's basically what their message was. I think he underscores that with, again, the promise of price stability and the importance of price stability for our economy and the labor market.

Jeff Buchbinder:

Yeah, I think it's appropriate Quincy, that the market is, the stock market anyway, is kind of right in between. Yeah. You know, the, kind of the recent highs, recent lows, it's sort of a mm-hmm. <Affirmative>, I don't know, no man's land. Yes. Waiting for a signal from the Fed. So, as you alluded to earlier, maybe, you know, this will be the thing, this meeting this weekend that either pushes us up toward the recent highs or back down to maybe not to retest the June lows, but maybe to that 50-day moving average.

 

Powell will be hawkish. I also think it makes sense to focus on you know, how far this will go rather than 50 or 75. So, the questions I'm asking myself, one, will the Fed win the battle on inflation? And I think the answer's yes, and I think our team, yes. at LPL Research thinks the answer is yes eventually mm-hmm. <Affirmative>. And then how far will they have to take Fed funds? Well, given they're shrinking the balance sheet and there's a lot of other things going on that are tightening financial conditions, in addition to rate hikes. Yes. Once they get to four, that could be enough. Maybe they only get to three and a half, we'll see. But mm-hmm. <Affirmative> certainly good chance. That's enough.

Quincy Krosby:

The great moderation is over though. We know that.

Jeff Buchbinder:

Sure. Absolutely. So, it'll be still very interesting to watch Powell, but I don't think we're going to get too much information about what the world's going to look like in Q1. No <laugh>.

Quincy Krosby:

No, no, no, no.

Jeff Buchbinder:

So, we'll also get these flash PMIs globally. So, it'll be interesting to see how you know, Europe performs relative to the U.S. Right. Given the energy crisis is intensifying, as you know, we get closer to winter over there. And then you mentioned the PCE, so Jeff Roach thinks that the PCE will come down a bit based on its components. So, mm-hmm. <Affirmative> like you said, Quincy, that may put markets in a little bit better mood heading into Powell's comments Friday morning. So really, really interesting week. Mm-Hmm. <affirmative>, just a lot of key data, a lot of interesting data points and comments coming out of the Fed for folks to watch. So, we'll see what happens. But, you know, we think that market probably has a little bit more downside near term. A pullback probably makes sense

 

given how far we came in such a short period of time and given certainly this inflation battle. While we think it will eventually be won has not been won just yet. So, with that we'll close it out. Thank you, Quincy, for joining another Okay. addition of LPL Market Signals. Thank you to all of our listeners. We greatly appreciate you being with us, especially during vacation time. Hopefully some of you are listening to this on your phones at the beach rather than back at your offices. So, wherever you are thanks for joining us. We'll be back with you next week for another edition of Market Signals. We will see you then. Have a great day everybody.

Podcast Outro:

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How Much Further Will This Slide Go?

In the latest LPL Market Signals podcast, Chief Equity Strategist Jeffrey Buchbinder and Chief Global Strategist Quincy Krosby share their thoughts on how far this latest pullback might go. They also provide an update on the housing market, discuss rising recession risks in Europe, and preview the Federal Reserve’s Jackson Hole symposium later this week.

How Much Further Might This Slide Go?

The strategists think the Fed’s symposium in Jackson Hole this weekend will go a long way toward determining the near-term direction of the stock market. With just a 4% pullback so far and the inflation battle nowhere near over, additional downside is possible. LPL Research is looking to the 3,900 to 3,950 range as potential support for the S&P 500 Index should further downside materialize. The S&P 500’s 17% rally accompanied by surging breadth in October 2011 was followed by a 10% correction in November 2011, suggesting that additional volatility may come even though the strategists expect stocks to be solidly higher one year from now.

Housing Slowdown Likely to Continue

The strategists noted that the housing market continues to feel the effects of rising interest rates and inflation pressures. Existing home sales fell 5.9% in July, the biggest one-month drop since February 2022 and the sixth straight monthly decline. Outside of the pandemic, sales reached their lowest levels since 2015. Based on lower buyer traffic and the lagged effect of Fed tightening, the housing slowdown is likely to continue and probably weighs on gross domestic product in the second half. The good news for home values is that supply is still tight, keeping the average number of days homes were on the market down at 14 days in July.

Europe’s Energy Crisis Worsening

The strategists discussed rising recession risk in Europe as energy prices continue to skyrocket. German electricity prices have gone parabolic. The strong dollar, while helpful for U.S. tourists going to Europe, and COVID-19-related disruptions in China are putting additional pressure on Europe’s economic growth. At the same time, the inflation outlook in the U.K. is becoming increasingly dire. Meanwhile, prices at the pump in the U.S. based on the AAA national average are down 70 days in a row, supporting LPL Research’s continued preference for U.S. equities over their European counterparts.

What to Expect at Jackson Hole

The Fed will likely reiterate their resolute focus on bringing inflation down this weekend, while also highlighting their data dependence. The strategists still believe the Fed will eventually win the battle on inflation, but it’s unclear how far rates will have to go to accomplish that. 

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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.

High yield/junk bonds (grade BB or below) are not investment grade securities, and are subject to higher interest rate, credit, and liquidity risks than those graded BBB and above. They generally should be part of a diversified portfolio for sophisticated investors.

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.

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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