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Inflation remains hot and it looks like lower prices aren’t coming anytime soon. This week on the LPL Market Signals podcast, LPL Financial Strategists, Jeff Buchbinder and Ryan Detrick, discuss what it all means for the economy and consumer. They also discuss what all the companies breaking up could mean for the bull market and finish with a discussion on how the consumer might feel bad about things but keeps on spending.

Inflation may be nearing its peak

Ryan and Jeff start with rising inflation. Much of the recent surge has been driven by pandemic-related factors that are not expected to persist beyond early 2022 despite currently elevated readings—which are likely to get worse before getting better. Although inflation may not peak for several months, some signs to watch for evidence of a peak include: inflation breakeven rates priced into the Treasury Inflation-Protected Securities (TIPS) market, stable or declining backlogs, and supplier delivery times in purchasing managers’ surveys. Long-term structural forces putting downward pressure on prices, such as globalization and technology, will begin to take hold again after supply chains and labor markets normalize.

Maybe breaking up isn’t so hard to do

Do planned splits by GE and Johnson & Johnson, among others, suggest that the stock market is overheated? While capital markets activity such as initial public offerings, acquisitions, and spin-offs do reflect a strong stock market environment, LPL strategists still believe stock valuations are reasonable based on an improving macroeconomic environment, strong earnings growth from corporate America, and low interest rates.

Consumers remain in excellent shape as holiday shopping season gets underway

The holiday shopping season is off to a good start after solid gains in retail sales in October and generally good quarterly results from the late-reporting retailers (so far) during third quarter earnings season. Gains in department stores are particularly encouraging—a sign consumers are hitting the mall. Though inflation has dampened consumer sentiment recently, trillions of dollars in savings, rising wages, and pent-up demand set up a strong finish to the year for shoppers. The National Retail Federation forecasts record-setting holiday sales during November and December of between $843.4 billion and $859 billion, an increase between 8.5 percent and 10.5 percent over 2020.

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.

 


IMPORTANT DISCLOSURES

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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